A Project Has an Initial Investment of 100

question 17

Multiple Choice

A project has an initial investment of 100.You have come up with the following estimates of the project's cash flows:

Suppose the cash flows are perpetuities and the cost of capital is 10%.What does a sensitivity analysis of NPV (no taxes) show? (Answers appear in order: [Pessimistic,Most Likely,Optimistic].)

• A)-50,20,+100.
• B)-100,-50,+80.
• C)-50,+50,+70.
• D)+5,+11,+18

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Definitions:

Exponentially Distributed

A probability distribution characterized by its constant rate of decline or growth, often used in the study of time until a specific event occurs.

Replications

The repetition of an experiment or study to confirm findings or to increase precision.

Processing Time

The duration required to complete a specific task or operation.

Queue 1

Typically refers to the first in a series of waiting lines or sequences where processes or people await their turn for service.