Consider the Following Statement by a Project Analyst: "I Analyzed

question 86

Essay

Consider the following statement by a project analyst: "I analyzed my project using scenarios for the optimistic,expected,and pessimistic cases.I computed break evens and conducted sensitivity and simulation analysis.I computed NPV,IRR,the profitability index,and payback.In the end,I have over a hundred different estimates and am more confused than ever.I would have been better off just sticking with my first estimate and going by my gut instinct." Critique this statement.

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Definitions:

Variable

A characteristic, number, or quantity that increases or decreases over time, or takes different values in different situations.

Fixed

Costs or expenses that do not change with the level of production or sales activity, such as rent or salaries.

Committed Fixed Costs

Investments in facilities, equipment, and basic organizational structure that can’t be significantly reduced even for short periods of time without making fundamental changes.

Short Term

A time period typically lasting less than one year, used to evaluate financial performance, investments, and objectives that are expected to be achieved within a brief timeframe.