Homework answers / question archive / 1) Sensitivity analysis determines? a

1) Sensitivity analysis determines? a

Business

Share With

---

1) Sensitivity analysis determines?

a. The amount of variation (±) in an estimate necessary to change the decision to select a

particular alternative.

b. How variation in estimates change the point at which the discounted benefit cash flows

equal the discounted cost cash flows.

c. The period of time required to recover the cost of an investment from the net cash flow

(profit or other benefits) produced by that investment for an interest rate of zero.

d. The PW (Benefits) / PW (Costs) ratio during any selected period of a project's useful

life.

 

2) When alternatives' useful lives are different and not a common multiple of each other?

a. Apply the least common multiple lives present worth, EUAW, or rate of return analysis

terminating in salvage value as appropriate.

b. You must always use an infinite analysis period and capitalized cost to assure

asymptotic convergence to a unique solution.

c. Apply the project life present worth, EUAW, or rate of return analysis terminating in

market value or salvage value as appropriate.

d. You can ignore project lives, because project life is not important in economic analysis.

 

3) When alternatives' useful lives are different but a common multiple of each other?

a. You must always use an infinite analysis period and capitalized cost to assure

asymptotic convergence to a unique solution.

b. Apply the project life present worth, EUAW, or rate of return analysis terminating in

market value or salvage value as appropriate.

c. Apply the least common multiple lives present worth, EUAW, or rate of return analysis

terminating in salvage value as appropriate.

d. You can ignore project lives, because project life is not important in economic analysis.

 

4) Breakeven analysis is a form of sensitivity analysis that determines?

a. The period of time required to recover the cost of an investment from the net cash flow

(profit or other benefits) produced by that investment for an interest rate of zero.

b. The amount of variation (±) in an estimate necessary to change the decision to select a

particular alternative.

c. How variation in estimates change the point at which the discounted benefit cash flows

equal the discounted cost cash flows.

d. The PW (Benefits) / PW (Costs) ratio during any selected period of a project's useful

life.