Asked by Rachel Hwang on Jul 07, 2024
Verified
Using simulation has few drawbacks since individual cash flows generally are independent and positively correlated.
Independent
Free from outside control or not depending on another's authority or subject to another's influence.
Positively Correlated
This term describes two variables that move in the same direction; as one variable increases, the other variable increases as well, and vice versa.
- Understand the importance of integrating risk considerations into capital budgeting decisions.
Verified Answer
JR
John Ryan O'RourkeJul 08, 2024
Final Answer :
False
Explanation :
Using simulation can have drawbacks such as overlooking interrelationships between cash flows, assuming perfect correlation, and the possibility of generating inaccurate results due to faulty assumptions or input data.
Learning Objectives
- Understand the importance of integrating risk considerations into capital budgeting decisions.
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