Sensitivity analysis measures a project's stand-alone risk by showing how much the project's NPV (or IRR)is affected by a small change in one of the input variables, say sales.Other things held constant, with the size of the independent variable graphed on the horizontal axis and the NPV on the vertical axis, the steeper the graph of the relationship line, the more risky the project, other things held constant.

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Sensitivity analysis measures a project's risk by showing how much the project's NPV is affected by a small change in one of the input variables. The steeper the slope of the relationship line, the more sensitive the project is to changes in that input variable and the riskier the project is.

Sensitivity Analysis Measures a Project's Stand-Alone Risk by Showing How