Author Question: Which statement best describes sensitivity analysis? (Read 89 times)

heatherbabydoll1 · **on:** Aug 7, 2023

Which statement best describes sensitivity analysis?

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Sensitivity analysis is a method for evaluating a project that uses a number of possible values for a given variable, such as cash inflows, to assess its impact on the firm’s return in simulation analysis.

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Sensitivity analysis is a statistically based behavioural approach to project analysis that applies predetermined probability distributions in the scenario approach.

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Straightforward sensitivity analysis, as it is generally employed, is incomplete in that it fails to consider the range of likely values for the key input variables and the probabilities of different input values.

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Sensitivity analysis is a type of risk analysis that considers both the sensitivity of NPV to changes in key variables and the likely range of variable values.

xinyifff · **Reply #1 on:** Aug 7, 2023

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