Topic
Sensitivity analysis
Instructions
- Review the types of assumptions used in sensitivity and scenario analysis.
- Describe how the options to expand or abandon a project are integrated in the capital budgeting process.
- Explain how decision trees are used to value investment alternatives.
Answer Preview
Sensitivity analysis is a method used to show how different values of independent variable will react on particular dependent variable. These reactions are based on given assumptions. These assumptions include: –
- Experimental design which assumes that parameters vary at a given point of time hence having maximum and minimum value levels before and after experiment.
Word Count: 200