The end result of a simulation analysis is
A) a probability distribution of project cash flows.
B) a clear decision on whether or not a project should be accepted.
C) a probability distribution of possible NPV's.
D) a list of value drivers and their probabilities.

Question

Quizplus · Accepted Answer

The end result of a simulation analysis is a probability distribution of possible NPV's. This is because the simulation considers various inputs with probabilities and calculates the corresponding outputs, resulting in a range of possible NPV outcomes with associated probabilities. The simulation model cannot provide a clear decision but rather presents possible outcomes to aid decision-making. Option A is too narrow as the simulation model gives more than project cash flows. Option D does not represent the purpose of the simulation analysis.

The End Result of a Simulation Analysis Is