An analysis that breaks the net present value (NPV)calculation into its component assumptions and shows how the net present value (NPV)varies as one of the underlying assumptions changes is called:

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Sensitivity analysis examines how a change in one input variable affects the outcome of the NPV calculation. It involves varying one assumption while keeping all other inputs constant to see how the NPV changes. This helps identify which assumptions have the biggest impact on the NPV and informs decision-making. Scenario analysis involves varying multiple assumptions simultaneously to create different scenarios, while IRR analysis and accounting/EBIT break-even analysis focus on different aspects of financial analysis. Therefore, sensitivity analysis is the best choice for the given description.

An Analysis That Breaks the Net Present Value (NPV)calculation into Its