5. Sensitivity and scenario analysis Different techniques for analyzing project risk require different input variables and assumptions. The procedure in which one of the elements (or variables) affecting a project's expected value is changed to study its effect on the expected value is called analysis. Zeva 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. NPV Millions of dollars Base Case NPV Base Case Cost of Capital 12 COST OF CAPITAL (Percent This curve implies that the project is not very sensitive to changes in cost of capital. The project's NPV is likely to if the cost of capital increases to 15%. negative stay positive Along with the sensitivity analysis, Zeva 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 Worst case Base case Best case NPV? 3.50 million $5.62 million $11.34 million Probability (Pi) 0.20 0.45 0.35 Complete the missing information in Zeva's report: 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) million