Quantification of risk is difficult, and there are different types of risks, such as stand-alone risk, market risk, and political risk, associated with capital budgeting projects. Sensitivity analysis is a good technique to use when measuring market risk, but not when measuring stand-alone risk.

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Sensitivity analysis is a useful technique for measuring both stand-alone risk and market risk, as it helps in understanding how changes in one variable affect the project's outcome, applicable to various types of risks.

Quantification of Risk Is Difficult, and There Are Different Types