Topic 9 Quiz

Due Nov 22 at 11:59pm Points 10 Questions 10 Available Nov 16 at 8am - Nov 22 at 11:59pm 7 days Time Limit None

This quiz was locked Nov 22 at 11:59pm.

Attempt History
Attempt Time Score
LATEST Attempt 1 139 minutes 8 out of 10

Score for this quiz: 8 out of 10

Submitted Nov 16 at 1:39pm
This attempt took 139 minutes.

Question 1 0 / 1 pts

Scenario analysis allows a firm to ask what-if type questions in capital budgeting.

Correct Answer
True

You Answered False

Question 2 1 / 1 pts

The higher the total costs, the larger the net present value of a project.

True

Correct!
False

Question 3 1 / 1 pts

In previous chapters, we calculated NPV based on a project's forecast cash flows. When doing what-if analysis, this initial estimate is called the
base case.

Correct!
True

False

Question 4 1 / 1 pts

You want to determine how changes in the price of a product affect a project's NPV. To best determine the impact, you would most likely use
sensitivity analysis.

Correct!
True

False

Question 5 0 / 1 pts

You have put together a set of cash flow forecasts for a project and have found, on your first calculation, that the NPV is positive. You should use
scenario or sensitivity analysis to investigate the project in greater detail.

Correct Answer
True

You Answered False

 Question 6 1 / 1 pts

Total costs will be greater under the best-case scenario than under the base-case scenario

True

Correct! False

Question 7 1 / 1 pts

Sensitivity analysis is the term used to describe the process of examining the effects on the net present value of a project when the value of a
single variable is changed.

Correct! True

False

Question 8 1 / 1 pts

Forecasting risk emphasizes the point that the soundness of any management decision based on the net present value of a proposed project is
highly dependent upon the accuracy of the cash flow projections used in the analysis.

Correct! True

False

Question 9 1 / 1 pts

When you apply the highest sales price and the lowest costs in a project analysis, you are constructing:

A worst case scenario.

A base case scenario.

Correct! A best case scenario.

A sensitivity to sales quantity.

A sensitivity to fixed costs.

Question 10 1 / 1 pts

The Quick Producers Co. is analyzing a proposed project. The company expects to sell 10,000 units, give or take 5 percent. The expected
variable cost per unit is $6 and the expected fixed cost is $29,000. The fixed and variable cost estimates are considered accurate within a plus or
minus 4 percent range. The depreciation expense is $25,000. The tax rate is 34 percent. The sale price is estimated at $13 a unit, give or take 6
percent.

$840

$2,810

$5,090

Correct! $1,650

$8,530

Quiz Score: 8 out of 10