Evaluate the role of sensitivity analysis in the capital budgeting process.
Understand the Problem
The question is asking for an evaluation of the role of sensitivity analysis in the capital budgeting process, with several options provided to choose from.
Answer
B. Sensitivity analysis assesses how changes in key variables affect project outcomes.
The final answer is B. Sensitivity analysis assesses how changes in key variables affect project outcomes.
Answer for screen readers
The final answer is B. Sensitivity analysis assesses how changes in key variables affect project outcomes.
More Information
Sensitivity analysis evaluates the impact of changes in critical variables, allowing businesses to understand risks and ensure better decision-making in capital budgeting.
Tips
A common mistake is assuming sensitivity analysis guarantees success—it only measures potential impacts of variable changes.
Sources
- Sensitivity Analysis for Capital Budgeting - smallbusiness.chron.com
- How is sensitivity analysis used in capital budgeting? Explain. - homework.study.com
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