Sensitivity analysis evaluates projects by:
A) forecasting changes in interest rates that would increase financing costs.
B) recording profitability changes while changing one variable at a time.
C) ensuring that the project sponsor has the proper incentives.
D) testing for interrelated variables.

Question

Quizplus · Accepted Answer

Sensitivity analysis involves changing one variable at a time while keeping all others constant to determine the effect on the project's profitability. This helps identify the most critical variables and potential risks to the project's success. The other options listed are not directly related to sensitivity analysis.

Sensitivity Analysis Evaluates Projects By