An analysis that breaks the net present value (NPV) calculation into its component assumptions and shows how the net present value (NPV) varies as one of the underlying assumptions changes is called

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Quizplus · Accepted Answer

A sensitivity analysis breaks down the NPV calculation into its component assumptions and shows how changes in those assumptions affect the final NPV. This analysis can be used to determine which assumptions have the most significant impact on the project's profitability and identify potential risks. The other options, internal rate of return analysis, accounting break-even analysis, and scenario analysis, do not specifically address how changes in assumptions affect the NPV calculation.

An Analysis That Breaks the Net Present Value (NPV) Calculation