Multiple Choice Questions 1. An analysis of what happens to the estimate of the net present value…

Multiple
Choice Questions

1. An analysis of what happens to the estimate of the
net present value when you examine a number of different likely situations is
called _____ analysis.
A. forecasting
B. scenario
C. sensitivity
D. simulation
E. break-even

2. An analysis of what happens to the estimate of net
present value when only one variable is changed is called _____ analysis.
A. forecasting
B. scenario
C. sensitivity
D. simulation
E. break-even

3. An analysis which combines scenario analysis with
sensitivity analysis is called _____ analysis.
A. forecasting
B. scenario
C. sensitivity
D. simulation
E. break-even

4. An analysis of the relationship between the sales
volume and various measures of profitability is called _____ analysis.
A. forecasting
B. scenario
C. sensitivity
D. simulation
E. break-even

5. Variable costs:
A. change in direct relationship to the quantity of output produced.
B. are constant in the short-run regardless of the quantity of output
produced.
C. are equal to the change in a variable when one more unit of output is
produced.
D. are subtracted from fixed costs to compute the contribution margin.
E. form the basis that is used to determine the degree of operating
leverage employed by a firm.

6. Fixed costs:
A. change as the quantity of output produced changes.
B. are constant over the short-run regardless of the quantity of output
produced.
C. reflect the change in a variable when one more unit of output is
produced.
D. are subtracted from sales to compute the contribution margin.
E. can be ignored in scenario analysis since they are constant over the
life of a project.

7. The sales level that results in a project’s net
income exactly equaling zero is called the _____ break-even.
A. operational
B. leveraged
C. accounting
D. cash
E. present value

8. The sales level that results in a project’s net
present value exactly equaling zero is called the _____ break-even.
A. operational
B. leveraged
C. accounting
D. cash
E. present value

9. Conducting scenario analysis helps managers see
the:
A. impact of an individual variable on the outcome of a project.
B. potential range of outcomes from a proposed project.
C. changes in long-term debt over the course of a proposed project.
D. possible range of market prices for their firm’s stock over the life of
a project.
E. allocation distribution of funds for capital projects under conditions
of hard rationing.

10. Sensitivity analysis helps you determine
the:
A. range of possible outcomes given possible ranges for every variable.
B. degree to which the net present value reacts to changes in a single
variable.
C. net present value given the best and the worst possible situations.
D. degree to which a project is reliant upon the fixed costs.
E. level of variable costs in relation to the fixed costs of a project.

 

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