Sensitivity analysis measures the stand-alone risk of a project by showing how much the project's NPV is affected by a small change in one of the input variables, such as sales. Other things held constant, with the independent variable graphed on the horizontal axis, the steeper the graph of the relationship line, the less risky the project.

Question

Quizplus · Accepted Answer

The statement is incorrect. The steeper the graph of the relationship line, the more sensitive the project is to a small change in the input variable, indicating higher risk.

Sensitivity Analysis Measures the Stand-Alone Risk of a Project by Showing