Chapter 10: Project Analysis Flashcards
capital budget
list of planned investment projects
sensitivity analysis
analysis of the effects of changes in sales, costs, and so on, on project profitability
fixed costs
costs that do not depend on the level of output
variable costs
costs that change as the level of output changes
scenario analysis
project analysis given a particular combination of assumptions
simulation analysis
estimation of the probabilities of different possible outcomes- for example, from an investment project
break-even analysis
analysis of the level of sales at which the company breaks even
NPV break-even point
the level of sales at which NPV is zero
operating leverage
degree to which costs are fixed
degree of operating leverage (DOL)
percentage change in profits given a 1 percent change in sales
decision tree
diagram of sequential decisions and possible outcomes
real options
options to invest, modify, or dispose of a capital investment project
