True or false? a. Sensitivity analysis is unnecessary for projects with asset betas that are equal to
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a. Sensitivity analysis is unnecessary for projects with asset betas that are equal to 0.
b. Sensitivity analysis can be used to identify the variables most crucial to a project’s success.
c. If only one variable is uncertain, sensitivity analysis gives “optimistic” and “pessimistic” values for project cash flow and NPV.
d. The break-even sales level of a project is higher when breakeven is defined in terms of NPV rather than accounting income.
e. Risk is reduced when a high proportion of costs are fixed.
f. Monte Carlo simulation can be used to help forecast cash flows.
Monte Carlo simulation
Monte Carlo simulation is a technique used to understand the impact of risk and uncertainty in financial, project management, cost, and other forecasting models. A Monte Carlo simulator helps one visualize most or all of the potential outcomes to...
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Related Book For
Principles of Corporate Finance
ISBN: 978-0077404895
10th Edition
Authors: Richard A. Brealey, Stewart C. Myers, Franklin Allen
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