Consider the following statement by a project analyst: "i analyzed my project using scenarios for the base case, best case, and worst case. i computed break-evens and degrees of operating leverage. i did sensitivity analysis and simulation analysis. i computed npv, irr, payback, aar, and pi. in the end, i have over a hundred different estimates and am more confused than ever. i would have been better off just sticking with my first estimate and going by my gut reaction." critique this statement

In this kind of research discloses both a project's shortcomings and virtues. Even when all of the analysis is done, there is still a tremendous lot of uncertainty due to the very nature of the process. However, rather than being less confident in their decision-making, the analyst should be better educated and more confident in the end.

What is Scenario Analysis?

The practice of analyzing and evaluating prospective future events or scenarios in order to foresee different likely outcomes or realistic results is known as scenario analysis. Financial modeling is typically used to estimate changes in a company's value or cash flow when there are probable favorable and unfavorable events that could have an impact on the business.

What do you understand by Decision Criteria?

The sets of concepts, rules, and guidelines known as the decision criteria are what an organization utilizes to decide on a course of action.

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