Sensitivity analysis is based on:
A)varying a single variable and measuring the resulting change in the NPV of a project.
B)applying differing discount rates to a project's cash flows and measuring the effect on the NPV.
C)expanding and contracting the number of years for a project to determine the optimal project length.
D)the best, worst, and most expected situations.
E)various states of the economy and the probability of each state occurring.

Question

Quizplus · Accepted Answer

Sensitivity analysis involves changing one variable at a time to see how it affects the Net Present Value (NPV) of a project, helping to understand the impact of individual variables on the project's outcome.

Sensitivity Analysis Is Based On