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Running head: SENSITIVITY ANALYSIS 1 Sensitivity analysis Name Institution Date
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SENSITIVITY ANALYSIS 2 Sensitivity analysis Sensitivity analysis is a method that evaluates the impact of an independent variable on a certain dependent variable based on a certain set of assumptions. The method is applicable on defined boundaries which rely on input variables such as the impact of interest rate changes on bond value as well as the impact of variations in consumer traffic on the sales revenues. Additionally, sensitivity analysis is used to keep track of the variations in the external environment thereby allowing necessary actions to be implemented to avoid any loss. For instance, a business entity can evaluate the sensitivity of its costs, sale revenues as well as the changes in profit patterns. Sensitivity analysis is a key component in decision making and project appraisals. For instance, in order to determine the viability of a project, sensitivity analysis evaluates the quantifiable aspects of the project. In this regard, the sensitivity analysis only
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