Sensitivity analysis:
A)is more difficult to conduct than simulation analysis.
B)provides its user with the rate of return that corresponds to the project's IRR.
C)is affected primarily by the interrelationships between project variables.
D)indicates which variable(s)need to be most closely monitored.
E)provides limited information and therefore is rarely used in practice.

Question

Quizplus · Accepted Answer

Sensitivity analysis is used to identify the most influential variables in a project or decision. It helps to determine which variables require closely monitoring in order to manage risks and uncertainties effectively. Therefore, the correct choice is D.

Sensitivity Analysis