Scenario/sensitivity analysis is a procedure that can be used in the capital budgeting process to indicate how sensitive the ____ is to changes in a particular variable.
A)probability
B)return distribution
C)net present value
D)standard deviation

Question

Quizplus · Accepted Answer

Scenario/sensitivity analysis is used to determine the sensitivity of the net present value (NPV) to changes in a particular variable. It involves varying one input at a time to observe the impact on the NPV. The objective is to determine which variables have the most significant impact on the NPV and to identify which variables require more accurate estimates. Therefore, option C is the best choice as it directly relates to the purpose of scenario/sensitivity analysis.

Scenario/sensitivity Analysis Is a Procedure That Can Be Used in the Capital