If a project has 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 called a scenario analysis, which evaluates the potential outcomes of different scenarios or situations. It involves assigning probabilities to each scenario and calculating the expected value of each scenario to determine the most likely outcome. This helps in making informed decisions and managing risks.

If a Project Has an 80 Percent Probability of High