2. Project analysis (S10.1–10.2) True or false?

a. Sensitivity analysis is unnecessary for projects with asset betas that are equal to zero.

b. Sensitivity analysis can be used to identify the variables most crucial to a project’s success.

c. If only one variable is uncertain, sensitivity analysis gives “optimistic” and “pessimistic”

values for project cash flow and NPV.

d. The break-even sales level of a project is higher when break-even is defined in terms of NPV rather than accounting income.

e. Risk is reduced when most of the costs are fixed.