# Ch 7 - Chapter 07 Risk Analysis Real Options and Capital...

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Chapter 07 - Risk Analysis, Real Options, and Capital Budgeting 7-1 Chapter 07 Risk Analysis, Real Options, and Capital Budgeting Answer Key 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 Difficulty level: Easy Topic: SCENARIO ANALYSIS Type: DEFINITIONS 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 Difficulty level: Easy Topic: SENSITIVITY ANALYSIS Type: DEFINITIONS 3. An analysis which combines scenario analysis with sensitivity analysis is called _____ analysis. A. forecasting B. scenario C. sensitivity D. simulation E. break-even Difficulty level: Easy Topic: SIMULATION ANALYSIS Type: DEFINITIONS

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Chapter 07 - Risk Analysis, Real Options, and Capital Budgeting 7-2 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 Difficulty level: Easy Topic: BREAK-EVEN ANALYSIS Type: DEFINITIONS 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. Difficulty level: Easy Topic: VARIABLE COSTS Type: DEFINITIONS 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. Difficulty level: Easy Topic: FIXED COSTS Type: DEFINITIONS
Chapter 07 - Risk Analysis, Real Options, and Capital Budgeting 7-3 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 Difficulty level: Easy Topic: ACCOUNTING BREAK-EVEN Type: DEFINITIONS 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 Difficulty level: Easy Topic: PRESENT VALUE BREAK-EVEN Type: DEFINITIONS 9. Conducting scenario analysis helps managers see the: A. impact of an individual variable on the outcome of a project.

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## This note was uploaded on 03/03/2012 for the course ECON 106 taught by Professor Sengupta,j during the Fall '08 term at UCSB.

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Ch 7 - Chapter 07 Risk Analysis Real Options and Capital...

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