An Analysis That Breaks the Net Present Value (NPV) Calculation

question 8

Multiple Choice

An analysis that breaks the net present value (NPV) calculation into its component assumptions and shows how the net present value (NPV) varies as one of the underlying assumptions changes is called ________.

• A) scenario analysis
• B) internal rate of return (IRR) analysis
• C) accounting break-even analysis
• D) sensitivity analysis

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Definitions:

Budgeting Process

A systematic approach where businesses estimate their future income, expenditures, and capital needs to achieve their financial goals.

Selling Price

The amount of money for which a product is sold to the customer, not necessarily reflecting its cost or intrinsic value.

Department Spend

Relates to the total amount of money allocated and spent by a specific department within an organization.

Ensuring Budget

A financial plan that is designed to make sure all finances are covered and allocated appropriately for a certain period, often aimed at preventing overspending or deficits.