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6. An investment project requires an initial investment of 150. Your forecasts generate the following scenarios regarding project's revenues and costs: Pessimistic Most Likely Optimistic

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6. An investment project requires an initial investment of 150. Your forecasts generate the following scenarios regarding project's revenues and costs: Pessimistic Most Likely Optimistic Revenues 30 50 65 Costs 20 20 15 Assume that the cost of capital is 10% and the cash flows occur in perpetuity. a. Define and describe sensitivity analysis. Which are its main differences from scenario analysis and Monte Carlo simulations? [5 marks) b. Conduct a sensitivity analysis of the project's variations in costs. [7.5 marks) [Total: 12.5 marks)

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