You Calculate the Following Estimates of Project Cash Flows

question 52

Multiple Choice

You calculate the following estimates of project cash flows:
The revenues and costs occur in perpetuity,as opposed to the initial investment.The cost of capital is 8%.What does a sensitivity analysis of NPV (without taxes) show? (Answers appear in order: [Pessimistic,Most Likely,Optimistic].)

• A)25.00,+232.50,+440.00
• B)-100.00,+500.00,+800.00
• C)-90.00,-55.00,-20.00
• D)-88.33,-50.00,-18.50

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Definitions:

Type II Error

The error that occurs when a false null hypothesis is not rejected, often referred to as a "false negative."

Multiple Comparison

A statistical principle applied when multiple hypothesis tests are conducted simultaneously, requiring adjustment methods to control for the increased risk of Type I error.

Significant Difference

A statistical term indicating that the observed difference between two or more datasets is unlikely to be due to chance at a certain confidence level.

Tukey's Multiple Comparison

A statistical test used to find the differences between means in a set of data, part of post-hoc analysis following ANOVA.