The Difference Between Scenario Analysis and Sensitivity Analysis Is

question 80

Multiple Choice

The difference between scenario analysis and sensitivity analysis is:

• A)Scenario analysis is based upon the internal rate of return (IRR)and sensitivity analysis is based upon net present value (NPV).
• B)Only sensitivity analysis allows us to change our estimated inputs of our net present value (NPV)analysis.
• C)Scenario analysis considers the effect on net present value (NPV)of changing multiple project parameters.
• D)Only scenario analysis breaks the net present value (NPV)calculation into its component assumptions.
• E)Sensitivity analysis allows for variations in many of the underlying assumptions simultaneously.

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Definitions:

Interest Expense

The cost incurred by an entity for borrowed funds, often reported as a non-operating expense on the income statement.