Fm12 21 - j 1 What is sensitivity analysis Answer Sensitivity analysis measures the effect of changes in a particular variable say revenues on a

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Mini Case: 12 - 21 j. 1. What is sensitivity analysis? Answer: Sensitivity analysis measures the effect of changes in a particular variable, say revenues, on a project’s NPV. To perform a sensitivity analysis, all variables are fixed at their expected values except one. This one variable is then changed, often by specified percentages, and the resulting effect on NPV is noted. (One could allow more than one variable to change, but this then merges sensitivity analysis into scenario analysis.) j. 2. Perform a sensitivity analysis on the unit sales, salvage value, and cost of capital
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This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.

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