Sensitivity analysis is conducted by:
A) holding all variables at their base level and changing the required rate of return.
B) changing the value of two variables to determine their interdependency.
C) changing the value of a single variable and computing the change in the project's NPV.
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) reviewing a project after implementation to determine how the actual results are comparing to the predicted results.

Question

Quizplus · Accepted Answer

Sensitivity analysis involves changing the value of one variable at a time to see how it affects a particular outcome, such as the project's NPV, while keeping other variables constant. This helps in understanding the sensitivity of the project outcome to changes in individual variables.

Sensitivity Analysis Is Conducted By