The difference between scenario analysis and sensitivity analysis is ________.
A) scenario analysis is based upon the internal rate of return (IRR) and sensitivity analysis is based upon net present value (NPV)
B) only sensitivity analysis allows us to change estimated inputs of net present value (NPV) analysis
C) scenario analysis considers the effect on net present value (NPV) of changing multiple project parameters
D) only scenario analysis breaks the net present value (NPV) calculation into its component assumptions

Question

Quizplus · Accepted Answer

Scenario analysis considers the effect on net present value (NPV) of changing multiple project parameters, whereas sensitivity analysis only allows us to change estimated inputs of net present value (NPV) analysis. Option A is incorrect because both scenario analysis and sensitivity analysis can be based on either IRR or NPV. Option B and D are incorrect because they do not accurately describe the differences between the two types of analysis.

The Difference Between Scenario Analysis and Sensitivity Analysis Is ________