Ace Consulting, a multinational corporate finance consulting firm, is examining the sales potential for a new line of industrial motors developed by Clay Industries, a large industrial firm. In their analysis, Ace Consulting meets with the management of Clay Industries, and asks these individuals to specify the worst
"reasonable" set of circumstances, along with the best "reasonable set." These figures are measured against the predetermined "base case" situation. Which of the following choices best describes this technique for measuring stand-alone risk?
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A. B. C. D. E. F.E
Scenario analysis is a risk analysis technique that considers both the sensitivity of NPV to changes in key variables and the likely range of key variable values. In a scenario analysis, a financial analyst asks operating or other managers to identify the best and worst "reasonable" situations, and these situations are examined against the predetermined "base case."