Chapter 11 Flashcards
1
Q
What is G.I.G.O.
A
It is the concept of “Garbage in, Garbage out”, inferring that the predicted cash flows are not correct.
2
Q
How can we forecast risk?
A
We must examine what makes the NPV positives and look at current competition and potential competition.
3
Q
What is scenario analysis?
A
The investigation of changes in NPV through examining the different bounds
4
Q
What is sensitivity analysis?
A
Where we freeze all but one variable in order to test the reactivity of changing such to NPV
5
Q
What is simulation analysis?
A
A mixture of both sensitivity and simulation analysis usually done by computer
6
Q
What is cash break-even?
A
The sales level that results in OCF being equal to 0
7
Q
What is financial break-even
A
When the sales level results in 0 NPV
