6. Sensitivity and scenario analysis Different techniques for analyzing project risk require different input variables and assumptions. Suppose you are using the sensitivity analysis technique to evaluate project risk. You would change several input variables together model to evaluate the effect of the input factors on the expected value. in the Martina is a risk analyst. She is conducting a sensitivity analysis to evaluate the riskiness of a new project that her company is considering investing in. Her risk analysis report includes the sensitivity curve shown on the graph (0 Base Case NPV NPV (Millions of dollars) -20 -15 Base Case Units Sold -10 -5 0 5 10 15 CHANGES IN UNITS SOLD (Percent) 20 This curve implies that the project is very sensitive to changes in units sold. The project's NPV is likely to become negative if the number of units sold decreases by 10% . Along with the sensitivity analysis, Martina is including a scenario analysis for the project in her report, giving the probability of the project generating a negative NPV. Her report includes the following information about the scenario analysis: Outcome Pessimistic Most likely Optimistic Probability (P) 0.50 Data Collected NPV -$2.31 million $4.53 million $12.11 million 0.35 0.15 Complete the missing Information in Martina's report: The expected net present value of the project is $0.00 million Standard deviation of the net present value (the NPV of the project is likely to vary by million This curve implies that the project is very sensitive to changes in units sold. The project's NPV is likely to become negative if the number of units decreases by 10% Along with the sensitivity analysis, Martina is including a scenario analysis for the project in her report, giving the probability of the project generat a negative NPV. Her report includes the following information about the scenario analysis: Data Collected Outcome NPV Pessimistic -$2.31 million Most likely $4.53 million Optimistic $12.11 million Probability (P3) 0.50 0.35 0.15 Complete the missing information in Martina's report: The expected net present value of the project is 50.04 million Standard deviation of the net present value (the NPV of the project is likely to vary by million