1) Multiple choice-

In scenario analysis, the expected case is:

• the situation where a project obtains its financial breakeven point.

• a firm's most optimistic outlook that is likely to occur.

• based on a firm's historical average sales and costs.

• determined by a firm's current level of sales and costs.

• a firm's best guess of a future outcome.

2)

To set up a decision tree, you should

• use equal probabilities for success and failure.

• assign a constant discount rate to all decisions within the tree.

• ignore a project's initial cost.

• determine the cash flows that are most apt to occur given a set of circumstances.

• assign the most optimistic values to a success and the most pessimistic values to a failure.