For the Module 6 assignment, please respond to the following questions:
Module 6 Assignment
For the Module 6 assignment, please respond to the following questions:
1. What is forecasting risk? In general, would the degree of forecasting risk be greater for a new product or a cost-cutting proposal? Why?
2. What is the essential difference between sensitivity analysis and scenario analysis?
3. A coworker claims that looking at all this marginal this and incremental that is just a bunch of nonsense, saying, “Listen, if our average revenue doesn’t exceed our average cost, then we will have a negative cash fl ow,
and we will go broke!” How do you respond?
4. At one time at least, many Japanese companies had a “no-layoff” policy (for that matter, so did IBM). What are the implications of such a policy for the degree of operating leverage a company faces?
5. Airlines offer an example of an industry in which the degree of operating leverage is fairly high. Why?
Reference
Ackermann, H., Fochmann, M., & Wolf, N. (2016). The effect of straight-line and accelerated depreciation rules on risky investment decisions—An experimental study. International journal of financial studies, 4(4), 19.