What technique is used to analyse investment proposals when the cash-flow projections are uncertain?

Question

Quizplus · Accepted Answer

Sensitivity analysis is a technique used to assess the impact of changes in input assumptions on the outcomes of an investment proposal. It involves varying key assumptions, such as cash flow projections, to determine the impact on the investment's net present value (NPV) or internal rate of return (IRR). This analysis helps to identify which assumptions have the most significant impact on the investment's outcome and helps to determine the level of uncertainty associated with the investment proposal.

What Technique Is Used to Analyse Investment Proposals When the Cash-Flow