Hunterh92

What is defined as the sales level that corresponds to a zero NPV?

financial break-even

Forecasting risk is defined as the possibility that:

incorrect decisions will be made due to erroneous cash flow projections

An analysis which combines scenario analysis with sensitivity analysis is called ___ analysis.

simulation

The procedure of allocating a fixed amount of funds for capital spending to each business unit is called:

soft rationing

Assume you graph a project's net present value given various sales quantities. What would be correct regarding the resulting function?

The slope of the function measures the sensitivity of the net present value to a change in sales quantity.

Forecasting risk emphasizes the point that the correctness of any decision to accept or reject a project is highly dependent upon the:

accuracy of the projected cash flows

Fixed costs:

are constant over the short-run regardless of the quantity of output produced

What is the relationship between the percentage change in operating cash flow and the percentage change in quantity sold?

degree of operating leverage

Sensitivity analysis determines the:

degree to which the net present value reacts to changes in a single variable

Scenario analysis is defined as the:

determination of changes in NPV estimated when what-if questions are posed

Operating leverage is the degree of dependence a firm places on its:

fixed costs

As the degree of sensitivity of a project to a single variable rises, the:

greater the importance of accurately predicting the value of that variable

PC Enterprises wants to commence a new project but is unable to obtain the financing under any circumstances. This firm is facing:

hard rationing

Scenario analysis is best suited to accomplishing what analyzing a project?

identifying the potential range of reasonable outcomes

The base case values used in scenario analysis are the ones considered the most:

likely to occur

The change in variable costs that occurs when production is increased by one unit is referred to as the:

marginal cost

The change in revenue that occurs when one more unit of output is sold is referred to as:

marginal revenue

By definition, what must equal zero at the accounting break-even point?

net income

By definition, what must equal zero at the cash break-even point?

operating cash flow

An analysis of the change in a project's NPV when a single variable is changed is called ____ analysis.

sensitivity

Which type of analysis identifies the variable that are most critical to the success of a particular project?

sensitivity

What will be used in the computation of the best-case analysis of a proposed project?

the lowest variable cost per unit that can reasonably be expected

Variable costs can be defined as the costs that:

vary directly with sales

Sensitivity analysis is based on:

varying a single variable and measuring the resulting change in the NPV of a project

When you assign the lowest anticipated sales price and the highest anticipated costs to a project, you are analyzing the project under the condition known as:

worst case scenario analysis