If Sensitivity Analysis Indicates None of the Individual Variables Will

question 50

Multiple Choice

If sensitivity analysis indicates none of the individual variables will cause a negative NPV under pessimistic conditions, then the:

• A)project is assured to be successful.
• B)project's discount rate should be reduced.
• C)economic forecasts are possibly overly optimistic.
• D)interaction of the variables should be considered.

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Definitions:

Interim Financial Reports

Financial statements that are prepared and presented for a period shorter than a fiscal year, often quarterly or semi-annually, to provide timely information to stakeholders.

Gross Profit Method

An inventory estimation technique calculating the cost of goods sold by applying a gross profit margin to sales, used for interim financial reporting and estimating inventory levels.

Beginning Inventory

The value of stock held by a business at the start of an accounting period.

Gross Profit Rate

The percentage of revenue that exceeds the cost of goods sold, indicating the efficiency of production and pricing.