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State whether the following statements are true or false.

a$.$ Sensitivity analysis can be used to identify the variables most crucial to a project's success.

b$.$ Sensitivity analysis is used to obtain expected, optimistic, and pessimistic values for total project cash flows.

c$.$ Rather than basing one's estimate of NPV just on expected cash flows, it makes more sense to average the NPVs calculated from the pessimistic and optimistic estimates of cash flow.

d$.$ Risk is reduced when a high proportion of costs are fixed.

e$.$ The break$-$even level of sales for a project is higher when break$-$even is defined in terms of NPV rather than accounting income.

False

True

Mc

Graw

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