Sensitivity Analysis

question 91

Multiple Choice

Sensitivity analysis:

• A)provides the tradeoff between fixed and variable costs.
• B)provides an estimate of the most profitable situation that is reasonably expected.
• C)can be conducted on any input value used in the computation of a project's NPV.
• D)cannot evaluate a change in NPV related to a project's initial investment.
• E)should never be conducted if the base-case scenario results in a negative NPV.

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Definitions:

Capital Surplus

Excess amount received by a company over the par value of its stock, representing additional paid-in capital.

Earned Surplus

The portion of a company's net income that is retained for reinvestment, rather than being distributed as dividends to shareholders.

MBCA

Model Business Corporation Act, a recommendation for state law on corporations, providing a template for corporate governance and operations.

Net Asset Test

A financial assessment to determine a company's or individual's net worth by subtracting total liabilities from total assets.