Sensitivity analysis is conducted by:
A)holding all variables at their base level and changing the required rate of return assigned
To a project.
B)changing the value of two variables to determine their interdependency.
C)changing the value of a single variable and computing the resulting change in the current
Value of a project.
D)assigning either the best or the worst possible value to every variable and comparing the
Results to those achieved by the base case.
E)managers after a project has been implemented to determine how each variable relates to
The level of output realized.

Question

Quizplus · Accepted Answer

Sensitivity analysis involves changing the value of a single variable to see how it affects the current value of a project. This helps managers to identify which variables have the most impact on the project's outcome and to make informed decisions based on these findings. Holding all variables at their base level and changing the required rate of return (A) or assigning either the best or worst possible value to every variable (D) are not practical methods of sensitivity analysis. Changing the value of two variables (B) can be useful, but it does not provide as much insight as analyzing variables one at a time. After a project has been implemented (E), it is too late to conduct sensitivity analysis.

Sensitivity Analysis Is Conducted By