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2 years ago

Sensitivity analysis:______.

Business

1 answer:

alisha [4.7K]2 years ago

4 0

Answer:

b. helps identify the variable within a project that presents the greatest forecasting risk.

Explanation:

Sensitivity analysis refer to the financial model that measures how the variable i.e. target one should be impacted and depend on the change in the other variable that we called as an input variable

In this, it would help to identify the variable that lies within the project and provide the high risk of forecasting

Therefore the option b is correct

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Cardinal Company is considering a five-year project that would require a $2,915,000 investment in equipment with a useful life o

lora16 [44]

Answer: [1]. Simple Rate of Return = 16.64%

[2]. Profitability Index = 1.20

[3]. Payback Period = 2.73 years

[4]. Lower net present value

Explanation:

let us take a step by step process to deal with this question.

Given the Initial Investment = $2,915,000

With a useful Life of 5 years

Annual Net Cash flows = Annual Net Operating Income + Depreciation

Annual Net Cash flows = $485,000 + $583,000

Annual Net Cash flows = $1,068,000

(1). Simple Rate of Return = Annual Net Income / Initial Investment

Simple Rate of Return = $485,000 / $2,915,000

Simple Rate of Return = 16.64%

(2). Present Value of Cash Inflows = $1,068,000 * PVA of $1 (16%, 5)

Present Value of Cash Inflows = $1,068,000 * 3.27429

Present Value of Cash Inflows = $3,496,941.72

Profitability Index = Present Value of Cash Inflows / Initial Investment

Profitability Index = $3,496,941.72 / $2,915,000

Profitability Index = 1.20

(3). Payback Period = Initial Investment / Annual Net Cash flows

Payback Period = $2,915,000 / $1,068,000

Payback Period = 2.73 years

(4). An increase in discount rate, will cause a decrease in net present value

As a result causes the project's net present value to be lower.

cheers i hope this helps!!!

7 0

3 years ago

Which one of the following statements is correct concerning the expected rate of return on an individual stock given various sta

tekilochka [14]

Answer: e. The expected return is a weighted average of the returns where the probabilities of the economic states are used as the weights.

Explanation:

When calculating the expected return of a stock given the probabilities that different economic states would occur and the returns of the stock should those states occur, we use the probabilities as weights to get the weighted average of the returns given. This is the expected return.

Formula looks like this:

Expected return = (Probability that economy is good * return if economy is good) + (Probability that economy is average * return if economy is average) + (Probability that economy is poor * return if economy is poor)

8 0

3 years ago

Among a group of 2,500 people, 35 percent invest in municipal bonds, 18 percent invest in oil stocks, and 7 percent invest in bo

denpristay [2]

Answer:

Probability that the person selected will be one who invests in municipal bonds but not in oil stocks is $\frac{7}{25}$

Explanation:

Given : Total no of people in the group = 2500

Investors of municipal bonds = 35% i.e .35 × 2500 = 875

Investors of both municipal bonds and oil stocks

= 7% i.e .07 × 2500

= 175

Hence, the investors who have invested in municipal bonds but not oil stocks = 875 - 175 = 700 investors

Probability that the person being selected will be one who invests in municipal bonds but not in oil stocks = $\frac{No.\ of\ investors\ of\ municipal\ bonds}{Total\ no\ of\ investors}$

= $\frac{700}{2500}$

= $\frac{7}{25}$

8 0

2 years ago

Shore Co. sold merchandise to Blue Star Co. on account, $112,000, terms FOB shipping point, 2/10, n/30. The cost of the goods so

Crazy boy [7]

Explanation:

On the books of Shore Co

Cash A/c Dr $111,560

Sales discount A/c $2,240 ($11,2000 x 2%)

To Accounts receivable A/c $113,800 ($112,000 + $1,800)

(Being cash is received)

On the books of Blue star

Accounts payable A/c Dr $113,800 ($112,000 + $1,800)

To Merchandise inventory A/c $2,240 ($11,2000 x 2%)

To Cash A/c $111,560

(Being cash is paid)

8 0

3 years ago

Use the production function: Q = 4L1/2K1/2.Suppose that the price of labor is $5 and the price of capital is $20. Your firm desi

prisoha [69]

Answer:

E none of the above

Explanation:

5 0

3 years ago