Question: For sensitivity analysis, let's choose the inflation rate as the parameter to change. We'll analyze how the NPV of the project changes with different inflation

For sensitivity analysis, let's choose the inflation rate as the parameter to change. We'll analyze how the NPV of the project changes with different inflation rates.

Baseline assumption: Inflation rate

= 3 % .

Calculate NPV using this assumption.

Change in assumption: Inflation rate

= 4 % .

Recalculate NPV using the adjusted inflation rate.

Change in assumption: Inflation rate

= 2 % .

Recalculate NPV using the adjusted inflation rate.

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