As the degree of sensitivity of a project to a single variable rises, the:
A) less important the variable is to the final outcome of the project.
B) less volatile the project's net present value is to that variable.
C) greater is the importance of accurately predicting the value of that variable.
D) greater is the sensitivity of the project to the other variable inputs.
E) less volatile is the project's outcome.

Question

Quizplus · Accepted Answer

As the sensitivity of a project to a single variable rises, it means that small changes in that variable value would result in large changes in the outcome of the project. This highlights the importance of accurately predicting the value of that variable since even a small error could have a significant impact on the project's outcome. Hence, option C is the correct choice. Option A is incorrect because if the variable is highly sensitive, it means that it's critical to the final outcome. Option B and E are incorrect because the project's net present value and outcome, respectively, become more volatile as the sensitivity of the project to that variable increases. Option D is incorrect because the sensitivity of the project to the other variable inputs is not affected by the sensitivity to a single variable.

As the Degree of Sensitivity of a Project to a Single