Using a computer model to repeatedly vary the combination of project variables in order to compare vast numbers of potential NPVs is called:
A) scenario analysis.
B) sensitivity analysis.
C) NPV break-even analysis.
D)simulation analysis.

Question

Quizplus · Accepted Answer

Simulation analysis involves using a computer model to repeatedly vary project variables in order to compare a large number of potential NPVs. This allows for a more comprehensive and accurate analysis of the potential outcomes for a project. Scenario analysis involves analyzing specific scenarios or sets of assumptions, while sensitivity analysis involves identifying how changes in one variable affect the NPV. NPV break-even analysis is focused on identifying the point at which the NPV becomes positive, or the project breaks even. Therefore, simulation analysis is the best choice for this question.

Using a Computer Model to Repeatedly Vary the Combination of Project