Multiple Choice Questions
1. In conducting a sensitivity analysis, all of the following could be used as a measure of worth except:
(a) Present worth
(b) Cost-capacity equations
(c) Annual worth
(d) Benefit-cost ratio
2. When the measure of worth is plotted versus percent change for several parameters, the parameter that is the most sensitive in the economic analysis is the one:
(a) That has the steepest curve
(b) That has the fl attest curve
(c) With the largest present worth
(d) With the shortest life
3. In conducting a formalized sensitivity analysis using three estimates, the three estimates should be:
(a) Strategic, pessimistic, real likely:
(b) Deterministic, realistic, optimistic
(c) Optimistic, pessimistic, most likely
(d) Authentic, realistic, probabilistic
4. A decision tree includes all of the following except:
(a) Probability estimates for each outcome
(b) Measure of worth as the selection criterion
(c) Expected results from a decision at each stage
(d) The MARR
5. A real options analysis is most valuable when:
(a) The risk is low and stakes are high
(b) The stakes are low and risk is high
(c) The stakes are high and risk is high
(d) The stakes are low and risk is low