4. Sensitivity and scenario analysis Different techniques for analyzing project risk require different input variables and assumptions. The procedure in which a set of key elements affecting the expected value are changed to study the effect on the expected value is called sensitivity analysis. Diana is a risk analyst. She is conducting a sensitivity analysis to evaluate the riskiness of a new project that her company is considering investing in. Her risk analysis report includes the sensitivity curve shown on the graph. ? O NPV (Millions of dollars) Base Case NPV -30 Base Case Price O -24 -18 -12 -6 0 6 12 18 24 CHANGES IN SELLING PRICE (Percent) 30 This curve implies that the project is very sensitive to changes in the price of the product. The project's NPV is likely to become negative if the price for which the product can be sold decreases by 12% Along with the sensitivity analysis, Diana is including a scenario analysis for the project in her report, giving the probability of the project generating a negative NPV. Her report includes the following information about the scenario analysis: Data Collected Outcome NPV; Probability (P;) 0.35 Pessimistic -$5.62 million $7.94 million 0.30 Most likely Optimistic $16.45 million 0.35 Probability Data for z Z 0.03 0.06 0.09 -1.0 0.1515 0.1446 0.1379 -0.8 0.2033 0.1949 0.1867 -0.6 0.2643 0.2546 0.2451 -0.4 0.3336 0.3228 0.3121 Complete the missing information in Diana's report: (Note: Round your answers to two decimal places.) million. The expected net present value of the project is Standard deviation of the net present value (the NPV of the project is likely to vary by) $ Assuming that probability distribution is normal, the value of z is Thus, the project has a chance to generate an NPV of less than $0