An analysis of what happens to the estimate of net present value when only one input variable is changed is called ________ analysis.
A)forecasting
B)scenario
C)sensitivity
D)simulation
E)break-even

Question

Quizplus · Accepted Answer

Sensitivity analysis is used to determine how changes in one variable will impact the overall outcome, in this case the net present value. By changing one input variable at a time, a sensitivity analysis allows for a better understanding of the potential impact of specific changes. Forecasting involves making predictions about future outcomes, scenario analysis involves considering multiple potential scenarios simultaneously, simulation involves creating a model to simulate a particular scenario, and break-even analysis involves determining the level of sales necessary to cover costs. While these other types of analysis may be useful in different contexts, only sensitivity analysis focuses specifically on the impact of one variable.

An Analysis of What Happens to the Estimate of Net