Scenario analysis is best suited to accomplishing which one of the following when analyzing a project?
A)determining how fixed costs affect NPV
B)estimating the residual value of fixed assets
C)identifying the potential range of reasonable outcomes
D)determining the minimal level of sales required to break-even on an accounting basis
E)determining the minimal level of sales required to break-even on a financial basis

Question

Quizplus · Accepted Answer

Scenario analysis involves developing several possible scenarios of how the project may perform and analyzing the potential outcomes. This method is useful for identifying the range of possible outcomes and the associated probabilities. It does not directly address fixed costs or break-even points, but rather helps to evaluate the risks and uncertainties associated with the project's future performance. Therefore, option C is the best choice.

Scenario Analysis Is Best Suited to Accomplishing Which One of the Following