Because it's more in-depth, the predictions may be far more reliable. Get answer to your question and much more. A quantitative risk analysis and modeling technique used to help determine which risks have the most potential impact on the project. Which of the following statements most appropriately describes scenario analysis? The company expects to sell 4,500 units, which may increase or decrease by 11 percent under optimistic or pessimi, In addition to the information provided in the case, what additional information systems-related "reasonable" assumptions are you making related to MindPlay's situation described in the case? Using trial and error, it becomes necessary to use an IRR that . B) These investments determine the long-t. b. The rig will produce an estimated 1,200,000 bbl. a. Shipping and installation would cost an additional, Suppose the current price of gold is $650 per ounce. Established in 2008, Gifthong is. B. All of the following are advantages of direct ownership of property as a way of investing in real estate except: Investor retains control over management. A creative community for animated pictures and . Previous question Next question. It indicates how sensitive a project's NPV or IRR is to changes in particular variables. The Pullers Corporation specializes in consulting and reports the following results for the previous year: An investor is considering the purchase of an apartment complex from a developer at the point in time when the apartments are ready for first occupancy. With such an approach, an analyst comes up with different possible events that are likely to occur in the . This helps him in understanding. This textbook can be purchased at www.amazon.com, The Solar Calculator Company proposes to invest $5 million in a new calculator-making plant. It earns $1,000 per year and expects to pay all of it as dividends. Explore sensitivity analysis. Are financial managers and/or their firms to some degree legally liable for misrepresentations, careless errors, poor forecasts, and/or any other aspect of their pro forma financial statements that appear to be intentionally or unintentionally misleading? Organizational studies and human resource management. - 12th Edition, if cash flows are independent of capital structure, minimizing the weighted average cost of capital (WACC) is the same as maximizing the: a.Liquidating value of the firm b.Market value of the firm. B. lowering price or offering incentives to profitable customers. b. C. be based on conservative accounting choices. (a) frequently, it is difficult to specify precisely the relationship between a particular variable and net present value; - Identifies variables that may have the greatest potential impact on profitability and allows management to focus on these variables, under sensitivity analysis, the process used to determine profitability at various levels of sales. C. Pichery, in Encyclopedia of Toxicology (Third Edition), 2014 Sensitivity Analysis: Definition and Properties. For example, a stock trader might carry out a sensitivity analysis to understand how sensitive the price of a particular stock is to: Macro-economic conditions. Main Menu; by School; by Literature Title; . Secondly, It allows decision-makers to identify where they can make improvements in the future. Want to read all 10 pages? The following are drawbacks of sensitivity analysis except: B. underlying variables are likely to be interrelated. A financial calculator costs $10 per unit to manufacture and sells, for $30 per unit. Createyouraccount. Council, All of the following statements are true EXCEPT for: 1. Thus the external purchase price only needs to increase by $1 per unit (or $1/ $6 = 17%). Mller-MaerskGroup, headquartered in Copenhagen, Denmark. The points in the four scatterplots are always the same though sorted differently, i.e. Categorize the decision according to the area of finance, During the financial crisis in 2008-2009, investors who were diversified across industries: a. experienced no losses. Sensitivity analysis is a valuable financial tool that provides new and increased information about the project Our experts can answer your tough homework and study questions. Your f, Both Projects A and B are acceptable as independent projects. Round to the nearest 1,000 units. b) income distribution. c. experienced significant losses because most industries were suffering from weak economic conditions. All successful managers believe in the Efficient Market Hypothesis. If we invest in gold, there is a [math]\frac{3}{4}[/math] chance that we will end the 6-month period with$400 and a $\frac{1}{4}$ chance that we will end the 6-month period with $10,000 If we end up with x dollars, our utility function is given by u(x) = x1/2. School Vanderbilt University; Course Title FNEC 104155; Uploaded By ElderMorning3068; 8. All of these statements are drawbacks of sensitivity analysis. Which of the following is least likely to be a motivation for managers to issue financial reports of low quality? Find Mafia stock images in HD and millions of other royalty-free stock photos, illustrations and vectors in the Shutterstock collection. Yet, managers face incentives to str, Testing the validity of your calculations by subjecting them to change is known as: A. qualitative testing B. horizontal analysis C. vertical analysis D. sensitivity analysis E. none of the above, a. Projected investment results are greater than estimated C. Higher administrative fees than expected D. Lower employe, This chapter demonstrated that the requirement that new projects be accretive to firm's EPS sometimes results in accepting negative-NPV projects and rejecting positive-NPV projects.However, under more, This chapter demonstrated that the requirement that new projects be accretive to firm EPS sometimes results in accepting negative-NPV projects and rejecting positive-NPV projects. The following are drawbacks of sensitivity analysis EXCEPT: it can help identify the project's most important, all of these statements are drawbacks of sensitivity, This textbook can be purchased at www.amazon.com, The Solar Calculator Company proposes to invest $5 million in a new calculator-, making plant. It focuses on ratios that reflect profitability, efficiency, financing leverage, and other vital information about a business. A. Pearson product-moment correlation coefficient B. Coefficient of determination C. Regression analyses D. Point-biseri, 1.What condition suggest that a ratio variable should be transformed (recorded) into a dichotomous (two group) variable? If $x^{3}-1$ is even, then x is odd. The IRS has determined that during each of the next 12 months it will need the number of supercomputers given in Table 45. a.New high-tech products b.Projects that reduce fixed costs c.Expansions of the existing business. It includes the effects that change in interest rates have on the bond prices. 1. There are various advantages and disadvantages of sensitivity analysis, and it provides a solution to different business problems under different situations. You have developed the following information: From an analytical perspective, the data related to SAR filings can be very valuable as it may reveal additional patterns or trends which do not present themselves during case reviews. He however defaulted in payment as he migrated to the US. Not be worth the time and effort b. View the full answer. However, the selection of either one of these eliminates the option of selecting the other project. C. are risk adverse and require, All of the following are true regarding a high quality balance sheet except: a. The following are drawbacks of sensitivity analysis except: A. it provides ambiguous results. Determine the rental plan that meets the next 12 months requirements at minimum cost. A reduction in the fee equivalent to the profit made on the trade II. Sensitivity versus scenario analysis. Anusha is a financial analyst in RTE Telecom Inc. As part of her analysis of the annual distribution policy and its impact on the firm's value, she makes the following calculations and observations: Fill in the blanks using the following: . it can help identify the project's most important variables. all of these statements are drawbacks of sensitivity analysis. The following are drawbacks of sensitivity analysis EXCEPT: A. it can provide ambiguous results. Example of a spreadsheet holding data about a group of audio tracks. Course Hero uses AI to attempt to automatically extract content from documents to surface to you and others so you can study better, e.g., in search results, to enrich docs, and more. Course Hero uses AI to attempt to automatically extract content from documents to surface to you and others so you can study better, e.g., in search results, to enrich docs, and more. 2. The price of oil is $100/bbl. a. b) The results may be generalizable to a larger population. [4] The program operates on data entered in cells . $$ B. underlying variables are likely to be interrelated. End of preview. A) The investment adviser must notify the Administrator by th. The following are drawbacks of sensitivity analysis. Diversification cannot eliminate systematic risk. A data processing analyst for a research supplier finds that preliminary co. Social security can be justified on the grounds of: a) adverse selection. Is S, Thomas bought a residential house and lot from BDC Realty for P250,000.00 giving a down payment of P10,000.00 and promising to pay the balance of P240,000.00 in 20 years in monthly installments of. In many applications, the system in question involves a single or a set of mathematical models, encoded using computer software, that simulates the functioning of a real-world system of interest. The following are drawbacks of sensitivity analysis EXCEPT A it can provide. In management accounting, we use it to calculate the change of company net profit if other factors change. D. All of the above. for a change in component values up to their tolerance limits. He now went to ABC, B bought from S a secondhand motor vehicle which upon inspection by B had some mechanical troubles. Want to read all 31 pages? (Assume that revenues and costs occur at the end of each year. 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