The use of sensitivity analysis will generally result in
A)the calculation of a certainty equivalent NPV.
B)the calculation of a best case,a base case and a worst case.
C)the calculation of the coefficient of variation.
D)the calculation of the probability of the maximum profit.

Question

Quizplus · Accepted Answer

Sensitivity analysis involves testing different scenarios with varying input parameters to observe the effect on the output. The result often includes a best case, base case, and worst-case scenario, providing management with a range of potential outcomes based on different assumptions. While sensitivity analysis can inform a certainty equivalent NPV or demonstrate the coefficient of variation, these are not the primary outcomes of the process. Calculating the probability of maximum profit is not directly related to sensitivity analysis.

The Use of Sensitivity Analysis Will Generally Result in