Answer (C) is correct . Sensitivity analysis recognizes uncertainty about estimates by making several calculations using varying estimates. For instance, several forecasts of net present value (NPV) might be calculated under various assumptions to determine the sensitivity of the NPV to changing conditions or prediction errors. Changing or relaxing the assumptions about a certain variable or group of variables may drastically alter the NPV, resulting in a much riskier asset than was originally forecast.
Answer (A) is incorrect because Expected value analysis provides a rational means for selecting the best alternative for decisions involving risk by multiplying the probability of each outcome by its payoff, and summing the products. It represents the long-term average payoff for repeated trials.
Answer (B) is incorrect because Learning curves reflect the increased rate at which people perform tasks as they gain experience.
Answer (D) is incorrect because Regression analysis is used to find an equation for the linear relationships among variables.
|
