An exploration of the effect on NPV of changing multiple project parameters is called:
A)scenario analysis.
B)IRR analysis.
C)accounting break-even analysis.
D)sensitivity analysis.

Question

Quizplus · Accepted Answer

Scenario analysis is the exploration of how changes in multiple project parameters affect the net present value (NPV) of a project. It involves creating different scenarios by varying project assumptions such as sales volumes, prices, and production costs. The NPV is then calculated for each scenario to determine the range of possible outcomes. Other options such as IRR analysis and accounting break-even analysis do not involve exploring changes in multiple project parameters. Sensitivity analysis involves testing the effect of small changes in one parameter on the NPV, but does not explore changes in multiple parameters at the same time.

An Exploration of the Effect on NPV of Changing Multiple