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ch8 Student: _______________________________________________________________________________________ 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.... View Full Document

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