Chapter 10 Cue Cards

Pregunta	Respuesta
What is a capital budget	List of planned investments
Forms of Capital Budgeting (directions)	Bottom-up: Capital Budgeting Top-Down: Strategic Planning
Define Sensitivity Analysis	Analysis of the effects of changes in sales, costs etc on a project
Define Scenario Analysis	Project analysis given a particular combination of assumptions
Define Simulation Analysis	Estimating of the probabilities of different possible outcomes
Define Break - Even Analysis	Level of sales (or other variable) at which company breaks even
Scenario analysis uses different but consistent combinations of variables T/F	True
Difference in accounting and NPV Break even	Accounting is when revenues = total costs (zero) NPV is when NPV of project = zero
What is operating leverage	Degree to which firms operating costs are fixed
What is the Degree of Operating Leverage	Percentage change in operating profits when sales changes by 1%
What is a desirable characteristics in a project?	Flexibility

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