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What is Sensitivity Analysis for Investment Decisions about?
1) A sensitivity analysis of the investment project shows that the net present value is highly sensitive to uncertainty in the annual cash flows, ranging from -$3,423 to $15,613 depending on whether cash flows are at the low or high end of estimates. 2) In contrast, the net present value is relatively insensitive to uncertainty in the cost of capital, which could range from 9.5-12% 3) Given this, further analysis is needed to better understand and model the uncertainty regarding annual cash flows before
- Author
- Marcin Kot
- Language
- EN