Problem

True or false?a. Sensitivity analysis is unnecessary for projects with asset betas that ar...

True or false?

a. Sensitivity analysis is unnecessary for projects with asset betas that are equal to 0.


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


c. If only one variable is uncertain, sensitivity analysis gives “optimistic” and “pessimistic” values for project cash flow and NPV.


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


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


f. Monte Carlo simulation can be used to help forecast cash flows.

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Solutions For Problems in Chapter 10