Quiz Ch 10 – Simulation Models for Project Evaluation
Principles of Corporate Finance
Brealey, Myers, and Allen
13th Edition
How can simulation models be utilized in project analysis?
How can simulation models be utilized in project analysis?
What are the steps involved in Monte Carlo simulation for project analysis?
True or false: Typically, the quantity at which net present value breaks even is higher than the quantity at which accounting profit breaks even.
True or false: The option to delay is considered a form of abandonment option.
True or false: Abandonment values are typically higher for tangible assets than for intangible assets.
True or false: Generally, the break-even point based on Net Present Value (NPV) is lower than the break-even point calculated using accounting profit.
True or false: Due to compounding, the inclusion of a fudge factor in the cost of capital will disproportionately penalize longer-term projects.
True or false: Higher fixed costs in projects are usually associated with lower break-even points.
True or false: Typically, when building a Monte Carlo simulation model for an investment project, potential interdependencies between variables are often disregarded.
True or false: When companies break even in accounting profit, they essentially miss out on the opportunity cost of capital for their investments.