Asked by Hannah Emmett on Jun 10, 2024
Verified
In previous chapters, we calculated NPV based on a project's forecast cash flows. When doing what-if analysis, this initial estimate is called the ______________.
A) Initial analysis.
B) First go-around.
C) Base case.
D) Initial projection.
E) Best case scenario.
What-if Analysis
A process or method used to evaluate the potential outcomes or impacts of different scenarios or decisions by changing variables and observing the resulting changes.
Base Case
The set of assumptions, inputs, and data considered in a financial model or analysis that serves as a starting point for scenario analysis.
Forecast Cash Flows
The projection of a company or project's future financial liquidity over a specific period.
- Comprehend the principles and applications of net present value (NPV) and internal rate of return (IRR) in capital budgeting.
Verified Answer
SP
Sruhad PatelJun 11, 2024
Final Answer :
C
Explanation :
The initial estimate of NPV based on forecast cash flows during what-if analysis is referred to as the "Base case." This serves as the standard or reference point for comparing other scenarios.
Learning Objectives
- Comprehend the principles and applications of net present value (NPV) and internal rate of return (IRR) in capital budgeting.