A method for assessing how changes in cash flows and/or cost of capital would affect a investment decision is

Question

Quizplus · Accepted Answer

Sensitivity analysis is a method for assessing how changes in cash flows and/or cost of capital would affect an investment decision. It allows analysts to evaluate different scenarios and their potential impact on the profitability of the investment. Capital budgeting involves estimating the future cash flows of an investment and comparing them to the initial investment. Net present value analysis is a capital budgeting technique that calculates the present value of expected cash inflows and outflows to determine if the investment is profitable. Time-adjusted rate of return analysis is a method for determining the profitability of an investment based on the amount of time it takes for the investment to generate a return. While all of these methods are useful in evaluating investments, sensitivity analysis is the best choice for assessing how changes in cash flows and/or cost of capital would affect a decision.

A Method for Assessing How Changes in Cash Flows And/or