Question 1 1 pts Scenario analysis allows a firm to ask what-if type questions in capital budgeting. O True O False Question 2 1 pts The higher the total costs, the larger the net present value of a project. O True O False Question 3 1 pts In previous chapters, we calculated NPV based on a project's forecast cash flows. When doing what- if analysis, this initial estimate is called the base case. O True O False Question 4 1 pts You want to determine how changes in the price of a product affect a project's NPV. To best determine the impact, you would most likely use sensitivity analysis. True O False Question 5 1 pts You have put together a set of cash flow forecasts for a project and have found on your first calculation, that the NPV is positive. You should use scenario or sensitivity analysis to investigate the project in greater detail. O True O False Question 6 1 pts Total costs will be greater under the best-case scenario than under the base-case scenario O True O False Question 7 1 pts Sensitivity analysis is the term used to describe the process of examining the effects on the net present value of a project when the value of a single variable is changed. O True O False Question 8 1 pts Forecasting risk emphasizes the point that the soundness of any management decision based on the net present value of a proposed project is highly dependent upon the accuracy of the cash flow projections used in the analysis. O True O False Question 9 1 pts When you apply the highest sales price and the lowest costs in a project analysis, you are constructing: O A best case scenario. O A sensitivity to sales quantity. O A base case scenario. O A sensitivity to fixed costs. Question 10 1 pts The Quick Producers Co. is analyzing a proposed project. The company expects to sell 10,000 units, give or take 5 percent. The expected variable cost per unit is $6 and the expected fixed cost is $29,000. The fixed and variable cost estimates are considered accurate within a plus or minus 4 percent range. The depreciation expense is $25,000. The tax rate is 34 percent. The sale price is estimated at $13 a unit, give or take 6 percent. What is the earnings before interest and taxes under the worst case scenario? $840 $2,810 $5,090 $8,530 $1,650