Asked by katira Gonzalez on Jun 30, 2024
Verified
Which one of the following statements concerning scenario analysis of a proposed project is correct?
A) The worst case scenario determines the net present value of a project given that a natural disaster occurs.
B) Scenario analysis assures a firm that the actual results of a project will lie within the range of returns as computed under the best and the worst case scenarios.
C) Scenario analysis provides a clear signal to management to either accept or reject a project.
D) Scenario analysis only provides management with a glimpse of the possible range of outcomes that could result should a project be accepted.
E) When the base case scenario results in a positive net present value, management can be assured that the proposed project will meet or exceed their expectations.
Scenario Analysis
A process of analyzing possible future events by considering alternative possible outcomes (scenarios), thus helping in the decision-making process.
Net Present Value
A calculation that compares the value of all cash inflows and outflows of a project or investment, discounted back to their present value.
Worst Case Scenario
The most adverse or negative outcome that can occur in a given situation.
- Identify the methods and importance of scenario, sensitivity, and simulation analysis in assessing project outcomes.
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Learning Objectives
- Identify the methods and importance of scenario, sensitivity, and simulation analysis in assessing project outcomes.
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