Use the Table for the Question(s)below

question 84

Multiple Choice

Use the table for the question(s) below.
-Which of the following statements is FALSE?

• A)We can use scenario analysis to evaluate alternative pricing strategies for our project.
• B)Scenario analysis breaks the net present value (NP
• V)calculation into its component assumptions and shows how the net present value (NP
• V)varies as each one of the underlying assumptions changes.
• C)Scenario analysis considers the effect on net present value (NP
• V)of changing multiple project parameters.
• D)The difference between the internal rate of return (IR
• R)of a project and the cost of capital tells you how much error in the cost of capital it would take to change the investment decision.

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Definitions:

Expected Return

The return an investor believes is most likely on an investment—that is, the investor understands that the actual return may be somewhat different in certain investments like stocks. The mean of the probability distribution of returns.

Selling Price

The amount of money for which a product or service is sold to customers.

Dividend

A portion of a company's earnings distributed to its shareholders, usually in cash or as shares.

Investment Return

The gain or loss on an investment over a specified period, including income and changes in value, expressed as a percentage of the investment's cost.