Sensitivity Analysis Is Used in Capital Budgeting to

question 99

Multiple Choice

Sensitivity analysis is used in capital budgeting to

• A) Estimate a project's internal rate of return (IRR).
• B) Determine the optimal contribution margin given a set of resource constraints.
• C) Determine the amount that a variable in a decision model (e.g., annual after-tax cash inflows) can change without changing the indicated decision (e.g., acceptance of a project).
• D) Simulate probabilistic customer reactions to a new product.
• E) Capture income tax consequences.

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