An Analysis of What Happens to the Estimate of the Net

question 17

Multiple Choice

An analysis of what happens to the estimate of the net present value when you examine a number of different likely situations is called _____ analysis.

• A) forecasting
• B) scenario
• C) sensitivity
• D) simulation
• E) break-even

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Definitions:

Compounded Monthly

Calculating interest each month by adding it to both the original investment and the interest that has already been accumulated from past periods.

Quarterly Payments

Payments made four times a year at three-month intervals, often related to dividends or loan repayments.

Interest Rate

The expense a borrower bears for the use of funds from a lender, measured as a fraction of the principal.

Discount Rate

This term refers to the interest rate used in discounted cash flow analysis to figure out the current value of cash flows that will occur in the future.