What will happen to the net present value of a project if my predictions of cash flows change? I think the cash flows may be overestimated.What should be done to address this?
A) net present value analysis
B) internal rate of return
C) sensitivity analysis
D) payback period

Question

Quizplus · Accepted Answer

Sensitivity analysis is the best choice in this scenario. Sensitivity analysis measures how sensitive the NPV is to changes in certain parameters, such as cash flows. By conducting a sensitivity analysis, we can determine the impact of changes in cash flow on the NPV and make adjustments accordingly.

What Will Happen to the Net Present Value of a Project