Scenario Analysis

question 86

Multiple Choice

Scenario analysis:

• A)determines the impact a $1 change in sales has on the internal rate of return.
• B)determines which variable has the greatest impact on a project's net present value.
• C)helps determine the reasonable range of expectations for a project's anticipated outcome.
• D)evaluates a project's net present value while sensitivity analysis evaluates a project's internal rate of return.
• E)determines the absolute worst and absolute best outcome that could ever occur.

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Definitions:

Error of Estimation

This refers to the margin of error in statistical estimates, representing the degree of uncertainty around the estimated value.

Estimator

A rule or formula that provides a means to calculate an estimate of a given parameter from sample data.

Parameter

A value that summarizes a characteristic of a population or a statistical model.

Confidence Interval

A range of values, derived from sample statistics, that is likely to contain the value of an unknown population parameter, expressed with a certain level of confidence.