Which of the following statements accurately describes the primary limitation of using sensitivity analysis in evaluating project risk?
Question 2
In the context of Monte Carlo simulation for project risk analysis, what is the significance of assigning probability distributions to input variables?
Question 3
A project has an initial investment of $$ \$800,000 $. The expected annual cash flow is $ \$250,000 $ for 5 years, and the discount rate is $ 10\% $. If a sensitivity analysis shows that an $ 8\% $ decrease in annual cash flow reduces the NPV by $ \$40,000 $$, what is the new annual cash flow for the sensitivity analysis?
Question 4
Which of the following statements best describes 'project-specific risk' in corporate finance?
Question 5
When evaluating uncertainty impacts using Monte Carlo simulation, what is the primary output that helps in decision-making?
