Project analysis, in addition to NPV analysis, includes the following procedures:
I. Sensitivity analysis
II. Break-even analysis
III. Monte Carlo simulation
IV. Scenario Analysis
A) I only
B) I and II only
C) I, II, and III only
D) I, II, III, and IV

Question

Quizplus · Accepted Answer

Project analysis should include all four procedures, as they provide different insights and help to evaluate the project's risks and uncertainties. Sensitivity analysis helps to identify the most critical variables and their impact on the project's profitability, while break-even analysis shows the minimum level of sales needed to cover all the costs. Monte Carlo simulation allows for a probabilistic analysis of potential outcomes, while scenario analysis provides a systematic assessment of different possible scenarios and their likelihood. Together, these procedures offer a comprehensive way of evaluating the project's financial performance and identifying potential pitfalls.

Project Analysis, in Addition to NPV Analysis, Includes the Following