Chapter 11 Flashcards
1
Q
What is Forecasting Risk?
A
The possibility that errors in projected cash flows lead to incorrect decisions.
2
Q
What is the Scenario Analysis?
A
Analysis of what happens to NPV under three different cash flow scenarios
3
Q
What are the three ranges of outcomes?
A
Base case (estimated), Best case (higher), and Worst case (lower).
4
Q
What is the Sensitivity Analysis?
A
When we analyze what happens to NPV when we vary one variable at a time
5
Q
What is the Simulation Analysis?
A
Allows all variables to vary at the same time, providing a thick rage of estimates.
6
Q
What are the managerial options?
A
Options to abandon, to expand, to wait and see, tax planning
