Question

Jamie is analyzing the estimated net present value of a project under various conditions by revising the sales quantity, sales price, and the cost estimates. The type of analysis that Jamie is doing is best described as: Multiple Choice a. sensitivity analysis. b. erosion planning. c. opportunity evaluation. d. benefit planning. e. scenario analysis.

Answer 1

Answer:

The answer is option E) The type of analysis that Jamie is doing is best described as scenario analysis.

Explanation:

scenario analysis assesses the effect of changing all the input variables at the same time.

Scenarios being considered can relate to a single variable, such as the relative success or failure of a new product launch, or a combination of factors, such as the results of the product launch combined with possible changes in the activities of competitor businesses. The goal is to analyze the results of the more extreme outcomes to determine investment strategy.

In this case, scenario analysis is used in analyzing the estimated net present value of a project under various conditions by revising the sales quantity, sales price, and the cost estimates.