Asked by Roselyn Villaruz on Jul 13, 2024
Verified
Which of the following techniques gives an estimate of capital budgeting project risk in terms of the standard deviation of a project's NPV or IRR?
A) Computer simulation
B) Sensitivity/scenario analysis
C) Decision tree analysis
D) Both a and c
E) All of the above
Standard Deviation
A measure of the amount of variation or dispersion of a set of values, indicating how much the values deviate from the mean.
Capital Budgeting
The procedure a company follows to assess possible significant projects or investments.
NPV
Net Present Value; a method used in capital budgeting to evaluate the profitability of an investment or project by discounting all expected future cash flows to their present value using a specific discount rate.
- Gain insight into how sensitivity, scenario, and simulation analyses serve as instruments for evaluating risks in projects.
Verified Answer
Learning Objectives
- Gain insight into how sensitivity, scenario, and simulation analyses serve as instruments for evaluating risks in projects.
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