If a company wanted to find the effect of a change in the variable cost per unit of production on the net present value of a project, then the company might perform
A) a sensitivity analysis.
B) a scenario analysis.
C) a Monte Carlo simulation.
D) none of the above.

Question

Quizplus · Accepted Answer

A sensitivity analysis is a technique used to determine how changes in an input variable will affect the output variable. In this case, the input variable is the variable cost per unit of production and the output variable is the net present value of the project. A sensitivity analysis will help the company determine how sensitive the net present value is to changes in the variable cost per unit of production.

If a Company Wanted to Find the Effect of a Change