Sensitivity analysis is the term used to describe the process of examining the effects on the net present value of a project when:
A) The lower bounds of each variable are contrasted with the respective base values.
B) The most optimistic situation that is obtainable is presented.
C) All the variables are set to create a best or a worst case situation.
D) The sales quantity and price are set at the financial break-even level of sales.
E) The value of a single variable is changed.

Question

Quizplus · Accepted Answer

Sensitivity analysis involves changing the value of one variable at a time to see how it affects the net present value (NPV) of a project, allowing for the assessment of the impact of each variable individually.

Sensitivity Analysis Is the Term Used to Describe the Process