6. Methods of analyzing risk for capital budgeting decisions Aa Aa Several types of analyses are available for evaluating a project's risk. In the folowing table, correctly identify the analysis being described. Scenario Sensitivity Simulation Analysis Analysis Analysis Uses an algorithmic method to pick values randomly from probability distributions to calculate a project's NPV Requires changes in one assumption at a time to observe the impact on NPV Estimates the NPV after a given period of time, assuming specific changes in the values of multiple key factors that could affect a project's NPV O O Consider the following case Coppinger Corp. is considering the use of a computer to assign probability distributions to the input variables used in the analysis. The computer would then randomly select input variables from their distributions and calculate NPVs based on those selections. What kind of analysis is this? O Scenario analysis O Simulation analysis O Sensitivity analysis Suppose Coppinger Corp, is evaluating a new capital budgeting project and conducting some basic risk analysis. First, it calculates the project's NPV at various levels for the project's key input variables. Coppinger next calculates the project's NPV at various prices per unit, plots the results on the accompanying graph, and then repeats this process separately for variable cost per unit and required return. This process is a results are shown on the graph whose NPV [Mllions of $ 200 Price per Uni 120 40 Required Return 40 120 ariable Cost per Unit 200 20 12 12 20 DEVIATION 1%) According to this analysis, which variable is the key value At the current input-value estimates, does this project driver for the project have a positive or negative NPV? O Required return O Price per unit O Negative NPV O Positive NPV Variable cost per unit Decision trees are a visual representation of the sequential choices that financial decision makers face when making capital budgeting and investment decisions. In decision tree analysis, the discount rate move through the decision tree. as you