Which of the following statements about simulation analysis is correct?
A) The method essentially combines aspects of the scenario and sensitivity analysis techniques.
B) An advantage of this approach is that once the results are complete, there is often a clear decision rule to follow.
C) It is costly and likely used as a last resort for the analysis of capital budgeting projects.
D) Powerful computers are making this technique ever more impractical.
E) The probability of occurrence for different cases is most likely very easy to assess.

Question

Quizplus · Accepted Answer

Simulation analysis integrates elements from both scenario and sensitivity analyses by examining the effects of changing multiple variables simultaneously, unlike scenario analysis that considers different discrete scenarios or sensitivity analysis that changes one variable at a time. This makes it a comprehensive tool for assessing the impact of uncertainty on decision-making. The other statements are incorrect: B) Simulation often produces a range of outcomes without a single clear decision rule; C) While it can be costly, it's not necessarily a last resort; D) Advances in computing have made simulation more, not less, practical; E) Assessing probabilities can be complex and challenging in simulation analysis.

Which of the Following Statements About Simulation Analysis Is Correct