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30. In order to make a decision with a decision tree: A. one starts farthest out in time to make the first decision.B. one must begin at time 0.C. any path can be taken to get to the end.D. any path can be taken to get back to the beginning.E. None of the above.7-8
Chapter 07 - Risk Analysis, Real Options, and Capital Budgeting31. In a decision tree, the NPV to make the yes/no decision is dependent on: 32. In a decision tree, caution should be used in the analysis because: 33. Sensitivity analysis evaluates the NPV with respect to: 34. Sensitivity analysis provides information on: A. whether the NPV should be trusted and may provide a false sense of security if all NPVs are positive.B. the need for additional information as it tests each variable in isolation.C. the degree of difficulty in changing multiple variables together.D. Both A and B.E. Both A and C.7-9
Chapter 07 - Risk Analysis, Real Options, and Capital Budgeting35. Fixed production costs are: 36. Variable costs: 37. An investigation of the degree to which NPV depends on assumptions made about any singular critical variable is called a(n): 38. Scenario analysis is different than sensitivity analysis: A. because no economic forecasts are changed.B. because several variables are changed together.C. because scenario analysis deals with actual data versus sensitivity analysis which deals with a forecast.D. because it is short and simple.E. because it is a "by the seat of the pants" technique.7-10
Chapter 07 - Risk Analysis, Real Options, and Capital Budgeting