Diversification can help eliminate individual company risk. Step 2: Calculate the sensitivity (to the external purchase price) For indifference, the contribution from outsourcing needs to fall to $5 per unit. The more sensitive the NPV, the more critical is the variable. Sensitivity analysis can predict the outcomes of an event given a specific range of variables, and an analyst can use this information to understand how a change in one variable affects the other variables or outcomes. The business also knows how each parameter affects its functioning and profitability. After the sale, the car broke down due to engine trouble requiring an overhaul of the engine. d. always have negative NPVs. The following are drawbacks of sensitivity analysis EXCEPT A it can provide from FNEC 104155 at Vanderbilt University. Your boss has asked you to perform a comprehensive analysis of the company?s financi, 1. Thus the external purchase price only needs to increase by $1 per unit (or $1/ $6 = 17%). The following are drawbacks of sensitivity analysis except: A. it provides ambiguous results. Course Hero uses AI to attempt to automatically extract content from documents to surface to you and others so you can study better, e.g., in search results, to enrich docs, and more. D. all of the above statements are drawbacks of sensitivity analysis. Determine whether the following arguments are best interpreted as being inductive or deductive. All of the following are steps in the procedure for conducting a sensitivity analysis, except: (a) Determine which parameters might vary from the most likely estimated value (b) Change the parameters in the range of 100% to +100% (c) Select a measure of worth (d) Compute the results for each parameter using the measure of worth as a basis. Find Mafia stock images in HD and millions of other royalty-free stock photos, illustrations and vectors in the Shutterstock collection. At 15% discount rate, the following data were gathered: Present Value of Cash Inflows was N138, 223, 929.60 However, the NPV in this case is relatively high, meaning that the IRR should be greater than 15%. C. Pichery, in Encyclopedia of Toxicology (Third Edition), 2014 Sensitivity Analysis: Definition and Properties. Councilor Miles says it is worth it to society only if suppliers lower their costs to the city for the inputs to the project. C. it provides additional information about. These factors includes selling price, selling quantity, cost of raw material, etc. \\ Below are two situations. A financial calculator costs $10 per unit to manufacture and sells, for $30 per unit. There are also some disadvantages to relying on sensitivity analysis: (-) Outcomes are all based on assumptions on top of historical data, which makes them susceptible to being incorrect; (-) Looking at each factor individually, doesn't allow us to analyze the interaction and correlation between variables, as well as any effect it may have. Table 45: Mathematically, the dependent output formula is represented as, Z = X2 + Y2 A) Deterministic analysis B) Sensitivity analysis C) Discriminant analys, In addition to direct costs, there are other costs associated with new security offerings.These other costs include all of the following except: A)the cost of incentives such as the "Green Shoe" option B)the cost of overpricing C)the cost of stock price d. Customer profitability analysis might result in: A. dropping some customers that are unprofitable. Suppose $x \in \mathbb{Z}$. Course Hero is not sponsored or endorsed by any college or university. The IRS has determined that during each of the next 12 months it will need the number of supercomputers given in Table 45. Using trial and error, it becomes necessary to use an IRR that . The sensitivity of a circuit is defined as the ratio of the change in an output measurement of a circuit, to a change in a circuit parameter value that has a defined tolerance. Sensitivity analysis is performed using the following formula: S = (d x / x )/ (d p / p) ( Jorgensen, 1994 ), where S = sensitivity, x = state variable, P = parameter, d x and d p are change of values of state variables, parameters, and forcing functions, respectively, at 10% level in temporal scale. Do these projects contradict the goal of maximization of shareholder wealth? Which of the following is a statement of weak-form efficiency? D. all of the above statements are drawbacks of sensitivity analysis. On the other hand, scenario analysis assesses the effect of changing all the input variables at the same time. The return, Which of the following results in an over-funded defined benefit pension plan? An overreaction by developers in response to a change in demand typically results in \\ A) an increase in values. - 12th Edition, if cash flows are independent of capital structure, minimizing the weighted average cost of capital (WACC) is the same as maximizing the: a.Liquidating value of the firm b.Market value of the firm. Specificity: the ability of a test to correctly identify people without the disease. It studies how various sources of uncertainty contribute to the forecast's overall uncertainty by posing 'what if' questions. Scrap value of $500,000 is expected to arise at the end of four years. The historical returns for the past three years for Stock B and the stock market portfolio were Stock B: 24 percent, 0 percent, 24 percent; market portfolio: 10 percent, 12 percent, 20 percent. Corp. a.New high-tech products b.Projects that reduce fixed costs c.Expansions of the existing business. All of these statements are drawbacks of sensitivity analysis. Round to the nearest 1,000 units. D) a decrease in rents with an increase in vacancies. Y (vertical axis) is a function of four factors. The Financial Calculator Company proposes to invest $12 million in a new calculator-making plant. A creative community for animated pictures and . School Vanderbilt University; Course Title FNEC 104155; Uploaded By ElderMorning3068; The company expects to sell 4,500 units, which may increase or decrease by 11 percent under optimistic or pessimi, In addition to the information provided in the case, what additional information systems-related "reasonable" assumptions are you making related to MindPlay's situation described in the case? Which of the below is considered an input in the systems thinking example of a TPS? Discover the various benefits of sensitivity analysis. Example of a spreadsheet holding data about a group of audio tracks. 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The following are drawbacks of sensitivity analysis except a it can provide from FINANCE 544 at Swat College of Science & Technology, Mingora 6. Identify the top 5 sources of conflict in a BPO agreement for project management, Which of the following is NOT a reason why a firm's financial managers must take great care when making investment decisions? A. diversification, taxes, high initial investments B. low initial investments, professional management, diversification C. liquidity, high initial investments, diversification D. profes, A successful lease agreement is created so that both the lessee and lessor reap some benefits. Some of these ventures a, [The following information applies to the questions displayed below.] However, under more, The OASDI program provides several major benefits. D. All of the above. 11. The risk-free, rate is 10% per year, which is also the cost of capital. Because the moon moves relative to the earth so that it returns to the same position overhead after about 25 hours, there are two high and two low tides at any point every 25 hours. Want to read all 31 pages? C. are risk adverse and require, All of the following are true regarding a high quality balance sheet except: a. The difference between the two methods is that sensitivity analysis examines the effect of changing just one variable at a time. It examines the extent to which the uncertainty of each project element affects the objective being examined when all other uncertain elements are held at their baseline values. Southern Goods is analyzing a proposed project using standard sensitivity analysis. A) The investment adviser must notify the Administrator by th. Sensitivity analysis frequently uses in both business . a. Double click on ScanCode Map and enter the following value data: 00 00 00 00 00 00 00 00 02 00 00 00 00 00 3A 00 00 00 00 00. b. I. The corporate tax rate is 30%. C . Typically you would analyze the gain of a circuit, the frequency response, noise figure, etc. b) The results may be generalizable to a larger population. It should portray the economic resources that can be reasonably expected to generate future economic benefits. The use of credit allows you to own expensive products sooner. per year forever. unit. Most likely, the coefficien, Although there is no empirical evidence to strongly support this hypothesis, some financial journalists have claimed that American managers are shortsighted and overly risk-averse, preferring to take on relatively safe projects that pay off quickly instea. It is considering the construction, of a deep-sea oil rig at a cost of $500 million. Use the following ratio information for Johnson International and the industry averages for Johnson's line of business: Indicate in which areas Johnson requires further analysis. Assume no taxes.) Fringe benefits Prepare a report with the following information: -Outline the concept and objectives of fringe benefits -Benefits to employees -Benefits to employers -Fringe Benefits Tax (FBT) and c, Use the following information for calculating different ratios and also analyzing trends|Particulars|2015|2016 |Sales|200|220 |Variable costs|100|110 |Fixed costs|80|80 |Net income|20|30 |Dividend, Understanding risks that affect projects and the impact of risk consideration Garcia Real Estate is involved in commercial real estate ventures throughout the United States. This preview shows page 7 - 12 out of 19 pages. Could the following be a direct cause of financing feedback? A project requires an initial investment of $200,000 and is expected to produce revenues less costs (R-C) of 120,000 per year for 2 years (that is, at t = 1 and t = 2). D. all of the above statements are drawbacks of sensitivity analysis. A reduction in the fee equivalent to the profit made on the trade II. b. do compete with each other. Prove the following statements using either direct or contrapositive proof. A data processing analyst for a research supplier finds that preliminary co. Social security can be justified on the grounds of: a) adverse selection. Sensitivity analysis is a valuable financial tool that provides new and increased information about the project Our experts can answer your tough homework and study questions. One company in the portfolio of companies you are analyzing is a C. Data editing deals with detecting and correcting illogical, inconsistent, or illegal data in the information returned by the participants of the study. c. The Efficient Market Hypothesis predicts that stock prices reflect all information that, d. If a financial market is efficient, then the best estimate of the true worth of a security. a. All successful managers believe in the Efficient Market Hypothesis. B. underlying variables are likely to be interrelated. True negative: the person does not have the disease and the test is negative. Course Hero uses AI to attempt to automatically extract content from documents to surface to you and others so you can study better, e.g., in search results, to enrich docs, and more. In many applications, the system in question involves a single or a set of mathematical models, encoded using computer software, that simulates the functioning of a real-world system of interest. If the appropriate discount rate is 8 percent, the present. extraction costs are $50/bbl. Course Hero is not sponsored or endorsed by any college or university. Course Hero uses AI to attempt to automatically extract content from documents to surface to you and others so you can study better, e.g., in search results, to enrich docs, and more. b. Projected investment results are less than actual B. (Ignore taxes). Which of the following events would have caused these effects? He however defaulted in payment as he migrated to the US. Providing computer records B. b. Sheehan Corp. is forecasting an EPS of P3.00 for the coming year on its 400,000 outstanding shares of stock. This helps him in understanding. Categorize the decision according to the area of finance, During the financial crisis in 2008-2009, investors who were diversified across industries: a. experienced no losses. For example, a stock trader might carry out a sensitivity analysis to understand how sensitive the price of a particular stock is to: Macro-economic conditions. This textbook can be purchased at www.amazon.com, The Solar Calculator Company proposes to invest $5 million in a new calculator-making plant. Managers also have inside information that can aid their estimates of future outcomes. Best Answer. assign a score of high, moderate, or low to each option. [1] [2] [3] Spreadsheets were developed as computerized analogs of paper accounting worksheets. Candid adjective: a straightforward and honest look at something Synonyms : blunt . and. PI expects prices and costs to remain constant. Which of the following statements is false? A spreadsheet is a computer application for computation, organization, analysis and storage of data in tabular form. Anusha is a financial analyst in RTE Telecom Inc. As part of her analysis of the annual distribution policy and its impact on the firm's value, she makes the following calculations and observations: Fill in the blanks using the following: . It helps to determine the extent of dependency of an outcome on a specific value of the input. B) These investments determine the long-t. All of the following are advantages of direct ownership of property as a way of investing in real estate except: Investor retains control over management. Course Hero uses AI to attempt to automatically extract content from documents to surface to you and others so you can study better, e.g., in search results, to enrich docs, and more. It compels the decision maker to identify the variables which affect the cashflow forecasts. We are going to invest $1,000 for a period of 6 months Two potential investments are available: T-bills and gold If the$1,000 is invested in T-bills, we are certain to end the 6-month period with $1,296. Which one of the following terms best. 2. Two city councilors are debating whether to pursue a new project. Managers are responsible for ensuring fair and accurate financial reporting. Secondly, It allows decision-makers to identify where they can make improvements in the future. Briefly describe each of the following: a. Provide a situation that reflects a stronger desire to avoid a loss than to make a gain. To use Excel to generate a normally distributed random variable, you must know the mean and standard deviation of the distribution and have a random number between 0 and 1. a. End of preview. One of the biggest drawbacks of sensitivity analysis is how heavily it relies on the assumptions of an imperfect analyst, who then builds a financial model that business leaders will use to make crucial decisions that could reshape an entire company's fortunes. B. improve the ability to predict future earnings. Also state the criteria you use in reaching your decision (i.e., the presence of indicator words, the nature of the inferential link between premises and conclusion, or the character or form of argumentation). Get answer to your question and much more. D3b. it can help identify the project's most important variables. Explore sensitivity analysis. Conducting sensitivity analysis provides a number of benefits for decision-makers.
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