Which of the following statements is FALSE?
A)We can use scenario analysis to evaluate alternative pricing strategies for our project.
B)Scenario analysis considers the effect on NPV of changing multiple project parameters.
C)The difference between the IRR of a project and the cost of capital tells you how much error in the cost of capital it would take to change the investment decision.
D)Scenario analysis breaks the NPV calculation into its component assumptions and shows how the NPV varies as each one of the underlying assumptions change.

Question

Quizplus · Accepted Answer

Scenario analysis involves changing multiple parameters simultaneously to see the effect on NPV, not changing each assumption individually, which is sensitivity analysis.

Which of the Following Statements Is FALSE