If a project holds an 80 percent probability of high demand and a 20 percent probability of low demand, then the expected value of the net present value of the two different demand assumptions would give us a weighted average net present value for the project. Such an analysis is called:
A) a sensitivity analysis.
B) a scenario analysis.
C) a simulation analysis.
D) a horizontal analysis.

Question

Quizplus · Accepted Answer

This analysis is known as a scenario analysis, which involves analyzing the impact of different scenarios or assumptions on the project's outcomes. It helps project managers to make informed decisions by considering multiple possibilities and assigning probabilities to them. The other options (sensitivity analysis, simulation analysis, and horizontal analysis) are all different types of analysis but do not apply in this context.

If a Project Holds an 80 Percent Probability of High