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

The Short-Line Railroad is considering a $140,000 investment in either of two companies. The cash flows are as follows: Year Electric Co. Water Works 1.................. $85,000 $30,0002.................. 25,000 25,0003.................. 30,000 85,0004–10 ............ 10,000 10,000a. Using the payback method, what will the decision be? b. Using the Net Present Value method, which is the better project? The discount rate is 10%.

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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The Short-Line Railroad is considering a $140,000 investment in either of two companies. The cash flows are as follows: Year Electric Co. Water Works 1.................. $85,000 $30,0002.................. 25,000 25,0003.................. 30,000 85,0004–10 ............ 10,000 10,000a. Using the payback method, what will the decision be? b. Using the Net Present Value method, which is the better project? The discount rate is 10%.

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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.

Expert Solution & Answer

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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 - Why are interest charges not deducted when a...Ch. 12 - Prob. 5Q Ch. 12 - What are some differences in the analysis for a...Ch. 12 - Distinguish among beta (or market) risk,...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 that sensitivity analysis reflects the change in the end result of a project. Simulation analysis considers changes in multiple inputs at the same time.

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 that sensitivity analysis reflects the change in the end result of a project. Simulation analysis considers changes in multiple inputs at the same time.

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.