The possibility that inaccurate estimates of future cash flows will cause a project to incorrectly be accepted or rejected is known as:
A) Sensitivity analysis.
B) Scenario analysis.
C) Forecasting risk.
D) A break-even error.
E) A marginal error.

Question

Quizplus · Accepted Answer

Forecasting risk refers to the risk that incorrect predictions about future cash flows will lead to a project being wrongly accepted or rejected. This is because the decision to proceed with or abandon a project is often based on expected future cash flows, and inaccuracies in these forecasts can lead to suboptimal decisions.

The Possibility That Inaccurate Estimates of Future Cash Flows Will