An analysis of what happens to the estimate of the net present value when you examine a number of different likely situations is called _____ analysis.
A) forecasting
B) scenario
C) sensitivity
D) simulation
E) break-even

Question

Quizplus · Accepted Answer

Scenario analysis involves examining different possible situations or scenarios to determine the impact on the estimate of net present value. Sensitivity analysis involves changing one variable at a time to determine the impact on net present value. Simulation involves using computer models to generate multiple scenarios and determine the probability distribution of net present value. Forecasting involves making predictions about future outcomes. Break-even analysis involves calculating the level of sales necessary to cover all costs and generate a profit. While all of these techniques can be useful in analyzing net present value, scenario analysis is the best choice given the description provided.

An Analysis of What Happens to the Estimate of the Net