Sensitivity analysis determines the:
A)range of possible outcomes given that most variables are reliable only within a stated range.
B)degree to which the net present value reacts to changes in a single variable.
C)net present value range that can be realized from a proposed project.
D)degree to which a project relies on its fixed costs.
E)ideal ratio of variable costs to fixed costs for profit maximization.

Question

Quizplus · Accepted Answer

Sensitivity analysis determines how much the net present value of a project reacts to changes in a single variable. It usually involves testing the effect of small changes in key variables, such as sales volume, on the net present value. This allows decision-makers to identify which factors are most critical to the success of the project and to assess the risk associated with uncertain variables.

Sensitivity Analysis Determines The