Which of the Following Statements Is Most Correct

question 148

Multiple Choice

Which of the following statements is most correct?

• A) Sensitivity analysis is incomplete because it fails to consider the range of likely values of key variables as reflected in their probability distributions.
• B) In comparing two projects using sensitivity analysis,the one with the steeper lines would be considered less risky,because a small error in estimating a variable,such as unit sales,would produce only a small error in the project's NPV.
• C) The primary advantage of simulation is that it provides a very accurate point estimate of a project's NPV.
• D) One important benefit of simulation analysis as compared to scenario analysis,is that once the analysis is complete,it provides a clear accept/reject decision rule.
• E) Answers c and d are both correct.

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Definitions:

Equilibrium Price

The price at which the quantity of a good or service demanded equals the quantity supplied, achieving market equilibrium.

Inverse Supply

Displaying how supply levels adjust based on varying price points; this model inversely associates the supply quantity with its price.

Inverse Demand

A rephrased definition: It refers to the relationship that shows the price of a good as a function of the quantity demanded, essentially the inverse function of a demand curve.

Tax

A required economic dues or other form of assessment exacted from a taxpayer by government authorities meant to finance government activities and assorted public costs.