Which of the following best describe the term sensitivity analysis.
A) Investigation of what happens to NPV when only one variable is changed.
B) The determination of what happens to NPV estimates when we ask what-if questions.
C) The degree to which a firm or project relies on fixed costs.
D) The change in costs that occurs when there is a small change in output.
E) Taking into account the managerial options that are implicit in a project.

Question

Quizplus · Accepted Answer

Sensitivity analysis involves changing one variable at a time to see the effect on the Net Present Value (NPV), which aligns with option A.

Which of the Following Best Describe the Term Sensitivity Analysis