Several types of analyses are available for evaluating a project's risk. In the following table, correctly...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Several types of analyses are available for evaluating a project's risk. In the following table, correctly identify the analysis being described. Examines the effect of simultaneous changes in multiple drivers of a project's NPV Measures the change in NPV that occurs when only one variable is changed Uses computers to consider a large number of possibilities for a project Base case Worst case Best case Unit Sales 120,000 70,000 150,000 Consider the following case: Coppinger Corp. is evaluating a new project. Coppinger used the expected values of unit sales, price per unit, and variable cost per unit to calculate an expected NPV of $13,500. Coppinger has developed a few different possible cases of what demand and costs might look like for the new project, which are summarized in this table: Price per Unit Variable Cost per Unit $6.00 $4.25 $5.50 $6.50 Scenario Analysis $5.25 $3.80 Sensitivity Analysis NPV $13,500 -$22,600 $31,200 Simulation Analysis What kind of risk analysis is Coppinger using? Suppose Coppinger Corp. is evaluating a new capital budgeting project and conducting some basic risk analysis. First, it calculates the project's NPV at various levels for the project's key input variables. Coppinger next calculates the project's NPV at various prices per unit, plots the results on the accompanying graph, and then repeats this process separately for variable cost per unit and required return. This process is a , whose results are shown on the graph. NPV Millions of $1 200 Scenario analysis Simulation analysis Sensitivity analysis 120 40 -40 -120 -200 -20 -12 -4 Price per Unit 4 Required Return Variable Cost per Unit 12 20 DEVIATION (%1 According to this analysis, which variable is the key value driver for the project? Variable cost per unit Required return Price per unit At the current input-value estimates, does this project have a positive or negative NPV? Negative NPV Positive NPV Decision trees are a visual representation of the sequential choices that financial decision makers face when making capital budgeting and investment decisions. True or False: Typically the beginning of the project is riskier than later stages. Several types of analyses are available for evaluating a project's risk. In the following table, correctly identify the analysis being described. Examines the effect of simultaneous changes in multiple drivers of a project's NPV Measures the change in NPV that occurs when only one variable is changed Uses computers to consider a large number of possibilities for a project Base case Worst case Best case Unit Sales 120,000 70,000 150,000 Consider the following case: Coppinger Corp. is evaluating a new project. Coppinger used the expected values of unit sales, price per unit, and variable cost per unit to calculate an expected NPV of $13,500. Coppinger has developed a few different possible cases of what demand and costs might look like for the new project, which are summarized in this table: Price per Unit Variable Cost per Unit $6.00 $4.25 $5.50 $6.50 Scenario Analysis $5.25 $3.80 Sensitivity Analysis NPV $13,500 -$22,600 $31,200 Simulation Analysis What kind of risk analysis is Coppinger using? Suppose Coppinger Corp. is evaluating a new capital budgeting project and conducting some basic risk analysis. First, it calculates the project's NPV at various levels for the project's key input variables. Coppinger next calculates the project's NPV at various prices per unit, plots the results on the accompanying graph, and then repeats this process separately for variable cost per unit and required return. This process is a , whose results are shown on the graph. NPV Millions of $1 200 Scenario analysis Simulation analysis Sensitivity analysis 120 40 -40 -120 -200 -20 -12 -4 Price per Unit 4 Required Return Variable Cost per Unit 12 20 DEVIATION (%1 According to this analysis, which variable is the key value driver for the project? Variable cost per unit Required return Price per unit At the current input-value estimates, does this project have a positive or negative NPV? Negative NPV Positive NPV Decision trees are a visual representation of the sequential choices that financial decision makers face when making capital budgeting and investment decisions. True or False: Typically the beginning of the project is riskier than later stages.
Expert Answer:
Related Book For
Posted Date:
Students also viewed these accounting questions
-
Consider the facts presented in the following table for Tropical View, Inc.: Requirements 1. Complete the table by filling in the missing values. 2. Prepare one journal entry for each situation for...
-
Use the variable cost information in the following table to calculate average variable cost and average cost (assume fixed cost is $350), and then use this data to answer the questions that follow....
-
A probability distribution is partially given in the following table with the additional information that the even values of X are equally likely. Determine the missing entries in the table. 123456
-
From our discussions of recent criticisms of research into cultural differences: Can we safely assume the existence of single national cultures? Is the influence of culture as an explanatory...
-
Describe enterprise resource planning and its role in an organization.
-
What is an example of a social network, a media-sharing site, a thought-sharing site, and a mobile application?
-
The Buffalo Insurance Agency received the following notes during 2010: Requirements 1. Identifying each note by number, compute interest using a 360-day year, and determine the due date and maturity...
-
What interest rates are implied by the following lending arrangements? a. You borrow $500 and repay $555 in one year. b. You lend $1,850 and are repaid $2,078.66 in two years. c. You lend $750 and...
-
Homework i Saved Help Save & Exit Submit Check my work Warnerwoods Company uses a periodic inventory system. It entered into the following purchases and sales transactions for March. Date Activities...
-
For each item listed in the table below, input the balance for the date range 10/1/20XX to 12/1/20XX. For the Journal, input the balance for the date range 11/13/20XX to 12/1/20XX. Note: Enter your...
-
There are advantages and disadvantages to using wireless networking. Considering the problems with security, should wireless networking be a sole transmission source in the workplace? Why or why not?
-
In mid-2004 the president of Elis Cheesecake Company, Mr Marc Schulman, was reviewing the policies that had guided the international expansion of the firm. In the 1990s the company had recognized the...
-
Consider a program that reads data from an input file named in.dat, performs calculations, and outputs the results to a file named result. out. A. What would happen if the file in. dat did not exist...
-
Trace the program in Fig. 8.10 for \(n=5\) and draw the tree similar to the one in Fig. 8.21 . import java.util..; class Ch8Sample2 { public static void main(String[] args) { Scanner scanner;)...
-
Given the following variables, give the result of each of the following operations (show all 8 bits): int num1 =0b00110101, num2 =0b11001010, ans; A. ans = num1 \& num2; B. ans = num1 | num2; C. ans...
-
Convert the following binary numbers to their decimal equivalent: A. 00101111 B. 01010010 C. 01110110 D. 00111001
-
Intro You are using the CAPM to find the appropriate cost of equity for a new project that pays off a little over a year from now. Part 1 Attempt 1/3 for 10 pts. Given the following information,...
-
Do animals have rights? If so, what are they? What duties do human beings have toward animals? Does KFC protect animal welfare at an acceptable level?
-
Capital Company built two similar buildings. Each building took one year to build and required $45,000,000 in construction costs. Capital had limited internal financial resources, so it could fund...
-
What makes Jack Grubman the Michael Jordan of analysts? asks Geoffrey Smith, in his article The superstar who wears two hats. Jack Grubman was the lead stock analyst in the telecom sector for Salomon...
-
The following excerpts are taken from an article by Andrew Pollack published in The New York Titties, January 29, 2000.12 Nations Agree on Safety Rales for Biotech Food Delegates from more than 130...
-
Owing to a small federal grant from the Department of Housing and Urban Development (HUD) to the Town of Stillman, Nadine Gordimer, CPA has performed grant audits for the town in each of the past...
-
A public accounting firm has been engaged to perform the audit of a local, federally funded Housing Allowance Program. The objective of the program is to increase the housing standards of Agana...
-
The City of Central Falls has engaged Robert Cohen, CPA to audit the June 30, 1999 financial statements of the City's Water Department under the GAO's Government Auditing Standards. Cohen's report...
Study smarter with the SolutionInn App