The sensitivity analysis. Introduction: Sensitivity Analysis: The process to evaluate the effect of change in one variable on the end result of a project is called sensitivity analysis. It reflects the change in net present value with respect to change in an input unit with other variables remain constant. Scenario Analysis: The process to evaluate different probable events and their outcomes that is end result of a project is called scenario analysis. It reflects the level of end result with multiple estimates called scenario categorized as base, best, and worst case scenario. Simulation Analysis: Simulation analysis is an extended version of sensitivity analysis that has improved the evaluation process as it considers detailed inputs. It can record the effect of changes in multiple input variables at once.

Question

Market Fresh Foods is evaluating a new project to determine whether it warrants funding consideration. Having just taken over managing the project initiation process for Market Fresh from the previous project controller, Ray Bones is trying to evaluate the project's potential given its projected cash flows. As a first step, Ray developed the table of investment and revenue estimates below that he plans to use to determine the project's net present value. Market Fresh's CFO has indicated that, based on assumptions about risk during the course of the project, Ray should initially use 0.15 as a discount rate, but use 0.14 beginning in year 6. Assume all cash flows occur at the end of the specified year and calculate all values to three decimal places. if the problem has table data, copy the following lines and paste into the appropriate spot in the text section\footnotesize \baselineskip = 12pt\begin{tabular}{c | c}Investment & Revenue \\ \hline12.4 & 0 \\ 15.8 & 0 \\ 17.5…

Answer 1

Question

Chapter 12, Problem 9Q

a)

Summary Introduction

To explain: The sensitivity analysis.

Introduction:

Sensitivity Analysis:

The process to evaluate the effect of change in one variable on the end result of a project is called sensitivity analysis. It reflects the change in net present value with respect to change in an input unit with other variables remain constant.

Scenario Analysis:

The process to evaluate different probable events and their outcomes that is end result of a project is called scenario analysis. It reflects the level of end result with multiple estimates called scenario categorized as base, best, and worst case scenario.

Simulation Analysis:

Simulation analysis is an extended version of sensitivity analysis that has improved the evaluation process as it considers detailed inputs. It can record the effect of changes in multiple input variables at once.

b.

Summary Introduction

To explain: The scenario analysis

Introduction:

Scenario analysis is the process to reflect the outcome in different probable scenarios. It changes the estimates based on the depended factors.

c.

Summary Introduction

To explain: The simulation analysis and the project on which the simulation will be applied.

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Market Fresh Foods is evaluating a new project to determine whether it warrants funding consideration. Having just taken over managing the project initiation process for Market Fresh from the previous project controller, Ray Bones is trying to evaluate the project's potential given its projected cash flows. As a first step, Ray developed the table of investment and revenue estimates below that he plans to use to determine the project's net present value. Market Fresh's CFO has indicated that, based on assumptions about risk during the course of the project, Ray should initially use 0.15 as a discount rate, but use 0.14 beginning in year 6. Assume all cash flows occur at the end of the specified year and calculate all values to three decimal places. if the problem has table data, copy the following lines and paste into the appropriate spot in the text section\footnotesize \baselineskip = 12pt\begin{tabular}{c | c}Investment & Revenue \\ \hline12.4 & 0 \\ 15.8 & 0 \\ 17.5…

How do I determine which is the correct answer for this problem? A company estimates that an average-risk project has a WACC of 10 percent, a below-average-risk project has a WACC of 8 percent, and an above-average-risk project has a WACC of 12 percent. Which of the following independent projects should the company accept? a. Project A has average risk and an IRR = 9 percent. b. Project B has below-average risk and an IRR = 8.5 percent. c. Project C has above-average risk and an IRR = 11 percent. d. All of the projects above should be accepted. e. None of the projects above should be accepted. Please answer fast I give you upvote.

Your company, Kitchen Works, is employing the SDLC for its new information system. The company is currently performing a number of feasibility studies, including the economic feasibility study. A draft of the economic feasibility study has been presented to you for your review. You have been charged with determining whether only escapable costs have been used, the present value of cash flows is accurate, the one-time and recurring costs are correct, realistic useful lives have been used, and the intangible benefits listed in the study are reasonable. Although you are a member of the development team because of your strong accounting background, you have questions about whether some costs are escapable, the interest rates used to perform present value analysis, and the estimated useful lives that have been used. How might you resolve your questions?

Answer 2

Question

Chapter 12, Problem 9Q

a)

Summary Introduction

To explain: The sensitivity analysis.

Introduction:

Sensitivity Analysis:

The process to evaluate the effect of change in one variable on the end result of a project is called sensitivity analysis. It reflects the change in net present value with respect to change in an input unit with other variables remain constant.

Scenario Analysis:

The process to evaluate different probable events and their outcomes that is end result of a project is called scenario analysis. It reflects the level of end result with multiple estimates called scenario categorized as base, best, and worst case scenario.

Simulation Analysis:

Simulation analysis is an extended version of sensitivity analysis that has improved the evaluation process as it considers detailed inputs. It can record the effect of changes in multiple input variables at once.

b.

Summary Introduction

To explain: The scenario analysis

Introduction:

Scenario analysis is the process to reflect the outcome in different probable scenarios. It changes the estimates based on the depended factors.

c.

Summary Introduction

To explain: The simulation analysis and the project on which the simulation will be applied.

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Answer 3

Question

Chapter 12, Problem 9Q

a)

Summary Introduction

To explain: The sensitivity analysis.

Introduction:

Sensitivity Analysis:

The process to evaluate the effect of change in one variable on the end result of a project is called sensitivity analysis. It reflects the change in net present value with respect to change in an input unit with other variables remain constant.

Scenario Analysis:

The process to evaluate different probable events and their outcomes that is end result of a project is called scenario analysis. It reflects the level of end result with multiple estimates called scenario categorized as base, best, and worst case scenario.

Simulation Analysis:

Simulation analysis is an extended version of sensitivity analysis that has improved the evaluation process as it considers detailed inputs. It can record the effect of changes in multiple input variables at once.

b.

Summary Introduction

To explain: The scenario analysis

Introduction:

Scenario analysis is the process to reflect the outcome in different probable scenarios. It changes the estimates based on the depended factors.

c.

Summary Introduction

To explain: The simulation analysis and the project on which the simulation will be applied.

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Answer 4

Question

Chapter 12, Problem 9Q

a)

Summary Introduction

To explain: The sensitivity analysis.

Introduction:

Sensitivity Analysis:

The process to evaluate the effect of change in one variable on the end result of a project is called sensitivity analysis. It reflects the change in net present value with respect to change in an input unit with other variables remain constant.

Scenario Analysis:

The process to evaluate different probable events and their outcomes that is end result of a project is called scenario analysis. It reflects the level of end result with multiple estimates called scenario categorized as base, best, and worst case scenario.

Simulation Analysis:

Simulation analysis is an extended version of sensitivity analysis that has improved the evaluation process as it considers detailed inputs. It can record the effect of changes in multiple input variables at once.

b.

Summary Introduction

To explain: The scenario analysis

Introduction:

Scenario analysis is the process to reflect the outcome in different probable scenarios. It changes the estimates based on the depended factors.

c.

Summary Introduction

To explain: The simulation analysis and the project on which the simulation will be applied.

Expert Solution & Answer

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Answer 5

Chapter 12, Problem 9Q

a)

Summary Introduction

To explain: The sensitivity analysis.

Introduction:

Sensitivity Analysis:

The process to evaluate the effect of change in one variable on the end result of a project is called sensitivity analysis. It reflects the change in net present value with respect to change in an input unit with other variables remain constant.

Scenario Analysis:

The process to evaluate different probable events and their outcomes that is end result of a project is called scenario analysis. It reflects the level of end result with multiple estimates called scenario categorized as base, best, and worst case scenario.

Simulation Analysis:

Simulation analysis is an extended version of sensitivity analysis that has improved the evaluation process as it considers detailed inputs. It can record the effect of changes in multiple input variables at once.

b.

Summary Introduction

To explain: The scenario analysis

Introduction:

Scenario analysis is the process to reflect the outcome in different probable scenarios. It changes the estimates based on the depended factors.

c.

Summary Introduction

To explain: The simulation analysis and the project on which the simulation will be applied.

Answer 6

Chapter 12, Problem 9Q

a)

Summary Introduction

To explain: The sensitivity analysis.

Introduction:

Sensitivity Analysis:

The process to evaluate the effect of change in one variable on the end result of a project is called sensitivity analysis. It reflects the change in net present value with respect to change in an input unit with other variables remain constant.

Scenario Analysis:

The process to evaluate different probable events and their outcomes that is end result of a project is called scenario analysis. It reflects the level of end result with multiple estimates called scenario categorized as base, best, and worst case scenario.

Simulation Analysis:

Simulation analysis is an extended version of sensitivity analysis that has improved the evaluation process as it considers detailed inputs. It can record the effect of changes in multiple input variables at once.

Answer 7

Chapter 12, Problem 9Q

a)

Summary Introduction

To explain: The sensitivity analysis.

Introduction:

Sensitivity Analysis:

The process to evaluate the effect of change in one variable on the end result of a project is called sensitivity analysis. It reflects the change in net present value with respect to change in an input unit with other variables remain constant.

Scenario Analysis:

The process to evaluate different probable events and their outcomes that is end result of a project is called scenario analysis. It reflects the level of end result with multiple estimates called scenario categorized as base, best, and worst case scenario.

Simulation Analysis:

Simulation analysis is an extended version of sensitivity analysis that has improved the evaluation process as it considers detailed inputs. It can record the effect of changes in multiple input variables at once.

Answer 8

b.

Summary Introduction

To explain: The scenario analysis

Introduction:

Scenario analysis is the process to reflect the outcome in different probable scenarios. It changes the estimates based on the depended factors.

Answer 9

b.

Summary Introduction

To explain: The scenario analysis

Introduction:

Scenario analysis is the process to reflect the outcome in different probable scenarios. It changes the estimates based on the depended factors.

Answer 10

c.

Summary Introduction

To explain: The simulation analysis and the project on which the simulation will be applied.

Answer 11

c.

Summary Introduction

To explain: The simulation analysis and the project on which the simulation will be applied.

Answer 12

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Ch. 12 - Prob. 1Q Ch. 12 - Prob. 2Q Ch. 12 - Explain why net operating working capital is...Ch. 12 - Prob. 4Q Ch. 12 - Prob. 5Q Ch. 12 - Prob. 6Q Ch. 12 - Prob. 7Q Ch. 12 - Prob. 8Q Ch. 12 - Prob. 9Q Ch. 12 - If you were the CFO of a company that had to...

Solution Summary: The author explains sensitivity analysis, which evaluates the effect of change in one variable on the end result of a project. Simulation analysis considers changes in multiple inputs at the same time.

Concept explainers

Videos

To explain: The scenario analysis

Introduction:

Scenario analysis is the process to reflect the outcome in different probable scenarios. It changes the estimates based on the depended factors.

To explain: The simulation analysis and the project on which the simulation will be applied.

Chapter 12 Solutions

Solution Summary: The author explains sensitivity analysis, which evaluates the effect of change in one variable on the end result of a project. Simulation analysis considers changes in multiple inputs at the same time.

Concept explainers

Videos

To explain: The scenario analysis Introduction: Scenario analysis is the process to reflect the outcome in different probable scenarios. It changes the estimates based on the depended factors.

To explain: The simulation analysis and the project on which the simulation will be applied.

Chapter 12 Solutions

To explain: The scenario analysis

Introduction:

Scenario analysis is the process to reflect the outcome in different probable scenarios. It changes the estimates based on the depended factors.