Which one of the following statements concerning scenario analysis of a proposed project is correct?

A) The worst case scenario determines the net present value of a project given that a natural disaster occurs.
B) Scenario analysis assures a firm that the actual results of a project will lie within the range of returns as computed under the best and the worst case scenarios.
C) Scenario analysis provides a clear signal to management to either accept or reject a project.
D) Scenario analysis only provides management with a glimpse of the possible range of outcomes that could result should a project be accepted.
E) When the base case scenario results in a positive net present value, management can be assured that the proposed project will meet or exceed their expectations.

Question

Sesethu Mdladlamba · Accepted Answer

Final Answer : D, Explanation :  Scenario analysis helps management understand a range of possible outcomes by examining various scenarios, including best and worst-case scenarios. It does not guarantee results, provide clear accept/reject signals, or assure that actual results will fall within the analyzed range.

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