1. Why do scenario analysis?
1) To understand how much firm value is at risk given a possible future situation
2) To model the effect of changes in related variables on firm value
3) To evaluate the effect on firm value of improving a firm's culture
4) To understand which variable drive changes important to the firm or its capital providers.
2. Assume your scenario analysis shows that a possible outcome of a proposed operational change is a loss in firm value relative to continuing to doing business as usual. Should the firm abandon the proposed operational change?
1) Yes, we need to eliminate risk.
2) Not necessarily, that outcome may be unlikely.
3) No