Question

hich of the following is not true regarding the use of simulation in multinational capital budgeting? a. It can be used to generate a probability distribution of NPVs. b. It can only be used for one variable at a time. c. It generates a probability distribution of NPVs by randomly drawing values for the input variable(s). d. It can be used to develop probability distributions of all variables with uncertain future values.

Answer 1

B. It can only be used for one variable at a time

Explanation:

Simulation can accommodate multiple variables at a time. The variables could be constraints such as time, amount, quantity, duration. A range of expected values must either be developed or provided for the variables before simulation models can then be applied to these ranges to generate a distribution of NPVs.