The procedure in which one of the elements (or variables) affecting a projects expected value is changed to study its effect on the expected value is called _____ sensitivity or scenario 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.

Graph wouldnt copy. Change in Units Sold (Percent)Coordinates on -10, -5, 0, 5 and 10.

This curve implies that the project is very sensitive to changes in units sold. The project's NPV is likely to become negative if the number of units sold decreases by 5% or 10% (which one).

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 NPVj Probability (Pj)

Pessimistic -5.62 million 0.35

Most likely 7.94 million 0.30

Optimistic 16.45 million 0.35

Probability Data for z

z 0.03 0.06 0.09

0.4 0.3336 0.3228 0.3121

0.6 0.2643 0.2546 0.2451

0.8 0.2033 0.1949 0.1867

1.0 0.1515 0.1446 0.1379

Complete the missing information in Dianas report:

The expected net present value of the project is: 0.93 million or 6.17 million, 2.06 million or 6.85 million

Standard deviation of the net present value (the NPV of the project is likely to vary by) ______ 10.17 million or 9.30 million or 10.68 million or 9.33 million.