Scenario analysis ignores:
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A. B. C. D.D
It is the Sensitivity Analysis that ignores the range of likely values that key variables can take. This is rectified using Scenario Analysis.
Scenario analysis is a technique used to evaluate the potential outcomes of a project or investment by considering different scenarios or sets of assumptions. It involves estimating the financial results or key variables under different circumstances or events that may occur in the future. The purpose is to understand the potential impact of various scenarios on the project's performance.
Among the given options, the correct answer is D. "None of these answers." Scenario analysis does not ignore any of the factors mentioned in options A, B, and C. Let's examine each option in detail:
A. The range of likely values that key variables can take: Scenario analysis explicitly considers the range of likely values that key variables can take. In this analysis, multiple scenarios are created, each with different assumptions and values for the variables. By varying these variables within their likely ranges, the analysis provides insights into how different outcomes can be expected based on different sets of values.
B. Changes in some of the key variables: Scenario analysis specifically takes into account changes in some of the key variables. It involves altering the values of key variables to reflect different situations or events that may affect the project. By examining the impact of these changes, scenario analysis helps in assessing the project's sensitivity to various factors and identifying potential risks or opportunities.
C. Effect on the net present value (NPV) of changes in project variables: Scenario analysis also considers the effect on the net present value (NPV) of changes in project variables. The NPV is a commonly used financial metric to evaluate the profitability of an investment. By analyzing different scenarios with varying project variables, scenario analysis allows for an assessment of how changes in these variables can impact the NPV and, consequently, the financial feasibility of the project.
Given that all the options (A, B, and C) are valid factors considered in scenario analysis, the correct answer is D. "None of these answers." Scenario analysis takes into account the range of likely values of key variables, changes in key variables, and the effect of changes in project variables on the NPV.