Assume that you graph the changes in net present value against the changes in the value of a single variable used in a project. The steepness of the resulting function illustrates the:
A) Degree of operating leverage within the project.
B) Trade-off of variable versus fixed costs utilized by the project.
C) Range of total outcomes possible from accepting a proposed project.
D) Contribution margin of the project at various levels of output.
E) Degree of sensitivity of a project's outcome to a single variable of the project.

Question

Quizplus · Accepted Answer

The steepness of the graph showing changes in net present value against changes in the value of a single variable used in a project illustrates the degree of sensitivity of the project's outcome to that variable. A steeper slope indicates higher sensitivity, meaning small changes in the variable have a significant impact on the project's net present value.

Assume That You Graph the Changes in Net Present Value