Sensitivity Analysis

question 61

Multiple Choice

Sensitivity analysis:

• A)looks at the most reasonably optimistic and pessimistic results for a project.
• B)helps identify the variable within a project that presents the greatest forecasting risk.
• C)is used for projects that cannot be analyzed by scenario analysis because the cash flows are unconventional.
• D)is generally conducted prior to scenario analysis just to determine if the range of potential outcomes is acceptable.
• E)illustrates how an increase in operating cash flow caused by changing both the revenue and the costs simultaneously will change the net present value for a project.

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Definitions:

Pit Dwellings

Ancient or prehistoric dwellings dug into the ground and often covered with roofs, providing insulation from the environment.

Jomon Ceramics

Pottery produced in ancient Japan during the Jomon period, characterized by intricate patterns made by impressing cord into the clay before firing.

Shang Bronzes

Ancient Chinese bronze artifacts, primarily ritual vessels and weaponry, produced during the Shang dynasty (circa 1600–1046 BCE).

Kofun Period

An era in Japanese history (approximately 3rd to 6th centuries CE) characterized by the construction of large tomb mounds known as kofun.