Homework Answers
Answer: Scenario
In case of scenario analysis, various decisions are analyzed by
speculating various possible outcomes. For example,
in case of equity valuation, analysts use best case, average case
and worst case scenarios.
The accounting break-even, financial break even and cash break-even deal with revenue and the costs. These are not related to scenarios or outcomes.
Sensitivity analysis is used to understand the impact that a range of variables would have on a given outcome. So, here the outcome is already known and the values of different variables are changed to understand the impact on the outcome.
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analysis. a. If you want to determine the entire range of project outcomes that are reasonably...
Question 13 analysis. To determine the degree to which the projected not present value of a...
Question 13 analysis. To determine the degree to which the projected not present value of a project is dependent upon a single variable you should conduct Оа Scenario. Ob. Sensitivity Cash break-even Financial break-even Od Accounting break-even.
If you want the most detailed information possible about the potential outcome of a critical project...
If you want the most detailed information possible about the potential outcome of a critical project you should conduct: A. operating analysis. B. simulation analysis. C. sensitivity analysis. D. decision tree analysis. E. financial analysis.
You want to determine how changes in the price of a product affect a project's NPV...
You want to determine how changes in the price of a product affect a project's NPV and IRR. To best determine the impact, you would most likely use Scenario analysis. O a Base-case analysis. Ob. oc Multiple-outcome analysis. od Sensitivity analysis. Simulation analysis. Oe.
Problem 11-19 Project Analysis [LO1, 2, 3, 4] You are considering a new product launch. The...
Problem 11-19 Project Analysis [LO1, 2, 3, 4] You are considering a new product launch. The project will cost $1,975,000, have a four-year life, and have no salvage value; depreciation is straight-line to zero. Sales are projected at 220 units per year; price per unit will be $17,700, variable cost per unit will be $11,750, and fixed costs will be $570,000 per year. The required return on the project is 9 percent, and the relevant tax rate is 21 percent....
Basic scenario analysis Prime Paints is in the process of evaluating two mutually exclusive additions to...
Basic scenario analysis Prime Paints is in the process of evaluating two mutually exclusive additions to its processing capacity. The firm's financial analysts have developed pessimistic, most likely, and optimistic estimates of the annual cash inflows associated with each project. These estimates are shown in the following table. Project A $12,200 Project B $12,200 Initial investment (CF) Outcome Pessimistic Most likely Optimistic Annual cash inflows (CF) $880 $1,510 1,680 1,680 2,480 1,730 a. Determine the range of annual cash inflows...
i need 100% fresh and new answers for both parts 3.1 Perform a scenario analysis on...
i need 100% fresh and new
answers for both parts
3.1 Perform a scenario analysis on the data provided Case Study: Assume that the company, where you are working as a team in Financial Department, is considering a potential project with a new product that is expected to sell for an average price of $22 per unit and the company expects it can sell 650 000 unit per year at this price for a period of 4 years. Launching this...
When the financial executive estimates the cash flows of a project for a capital budgeting analysis,...
When the financial executive estimates the cash flows of a project for a capital budgeting analysis, there is a degree of uncertainty surrounding the estimates. In this context, which of the following statements is true? a) Recognizing the uncertainty surrounding the estimates, the financial executive should use the most pessimistic figures. b) Since financial executives cannot influence certain external factors, they do not have to understand how these external factors can affect the estimates. c) One way the financial executive...
The possibility that inaccurate estimates of future cash flows will cause a project to incorrectly be...
The possibility that inaccurate estimates of future cash flows will cause a project to incorrectly be accepted or rejected is known as: Oa A break-even error O b. Sensitivity analysis Oc Forecasting risk A marginal error. Oe. Scenario analysis
Basic scenario analysis Prime Paints is in the process of evaluating two mutually exclusive additions to...
Basic scenario analysis Prime Paints is in the process of evaluating two mutually exclusive additions to its processing capacity. The firm's financial analysts have developed pessimistic, most likely, and optimistic estimates of the annual cash inflows associated with each project. These estimates are shown in the following table. Project A Project B Initial investment (CF 0CF0) $12 comma 50012,500 $12 comma 50012,500 Outcome Annual cash inflows (CFCF ) Pessimistic $820820 $1 comma 5101,510 Most likely 1 comma 6201,620 1 comma...
3 Problem 11-5 Sensitivity Analysis and Break-Even [LO1, 3] We are evaluating a project that costs...
3 Problem 11-5 Sensitivity Analysis and Break-Even [LO1, 3] We are evaluating a project that costs $691,200, has an eight-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 85,000 units per year. Price per unit is $50, variable cost per unit is $35, and fixed costs are $740,000 per year. The tax rate is 24 percent, and we require a return of 10 percent on...
Question 13 analysis. To determine the degree to which the projected not present value of a project is dependent upon a single variable you should conduct Оа Scenario. Ob. Sensitivity Cash break-even Financial break-even Od Accounting break-even.
You want to determine how changes in the price of a product affect a project's NPV and IRR. To best determine the impact, you would most likely use Scenario analysis. O a Base-case analysis. Ob. oc Multiple-outcome analysis. od Sensitivity analysis. Simulation analysis. Oe.
Basic scenario analysis Prime Paints is in the process of evaluating two mutually exclusive additions to its processing capacity. The firm's financial analysts have developed pessimistic, most likely, and optimistic estimates of the annual cash inflows associated with each project. These estimates are shown in the following table. Project A $12,200 Project B $12,200 Initial investment (CF) Outcome Pessimistic Most likely Optimistic Annual cash inflows (CF) $880 $1,510 1,680 1,680 2,480 1,730 a. Determine the range of annual cash inflows...
i need 100% fresh and new
answers for both parts
3.1 Perform a scenario analysis on the data provided Case Study: Assume that the company, where you are working as a team in Financial Department, is considering a potential project with a new product that is expected to sell for an average price of $22 per unit and the company expects it can sell 650 000 unit per year at this price for a period of 4 years. Launching this...
The possibility that inaccurate estimates of future cash flows will cause a project to incorrectly be accepted or rejected is known as: Oa A break-even error O b. Sensitivity analysis Oc Forecasting risk A marginal error. Oe. Scenario analysis
3 Problem 11-5 Sensitivity Analysis and Break-Even [LO1, 3] We are evaluating a project that costs $691,200, has an eight-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 85,000 units per year. Price per unit is $50, variable cost per unit is $35, and fixed costs are $740,000 per year. The tax rate is 24 percent, and we require a return of 10 percent on...
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