Question: Sensitivity analysis: Is used for projects that cannot be analyzed by scenario analysis because the cashfkows are unconventional. Looks at the most reasonably optimisric and

Sensitivity analysis:

Is used for projects that cannot be analyzed by scenario analysis because the cashfkows are unconventional. Looks at the most reasonably optimisric and pessimistic results for a project. Is generally conducted prior to scenario analyis just to determine if the range of potential outcomes is acceptable. Illustrates how an increas in an opersting cash flow caused by changing both the revenue and costs simultaneously will change the net present value for a project. Helps indetify the variable within a project thats presents the greatest forecasting risk

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