One of the Problems Inherent in Sensitivity Analysis Is That

question 83

Multiple Choice

One of the problems inherent in sensitivity analysis is that:

• A) NPVs do not change once a project is introduced.
• B) most projects are equally sensitive to all variables.
• C) it can be difficult to define the range of outcomes.
• D) the cost of conducting the analysis is excessive.

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Definitions:

Swap Contract

A derivative contract through which two parties exchange financial instruments, typically involving cash flows based on a specified notional amount.

Specified Intervals

Pre-determined or agreed periods at which certain events or measurements take place.

Cash Flows

The total amount of money being transferred into and out of a business, especially as affecting liquidity.

Derivative Security

A financial instrument whose value is based on the performance of an underlying asset, such as stocks, bonds, commodities, or currencies.