6. Sensitivity and scenario analysis Different techniques for analyzing project is require different input variables and assumptions. Suppose you are using the sensitivity analysis technique to evaluate project risk. You would change model to evaluate the effect of the input factors on the expected value Martina is a risk analyst. She is conducting a sensitivity analysis to evaluate the risks In Her risk analysis report includes the sensitivity Curve shown on the graph of a new project that her com a considering investing of NPV CANOES UN SOLD 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 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: Data Collected Outcome NPV Dessimistic - $2.31 million Probability (P3) 0.50 Most likely $4.53 million 0.35 Optimisti 12.11 million 0.15 Complete the missing information in Martin's report: The expected present value of the project is Standard deviation of the present value the NPV of the project is aby to vary by 6. Sensitivity and scenario analysis Different techniques for analyzing project is require different input variables and assumptions. in the Suppose you are using the sensitivity analysis technique to evaluate project risk. You would change model to evaluate the effect of the input factors on the expected value several input variables together one input variable at a time Martina is a risk analyst. She is conducting a sensitivity analysis to evaluate the riskiness of a new In. Her risk analysis report includes the sensitivity curve shown on the graph. ring investing This curve implies that the project is very sensitive to changes in units sold. The project's NPV is kely to become negative if the number of units sold decreases by 10 Along with a negative vity analysis, Martina is including a scenaria analysis for the project in her report, giving the probability of the project generating p ort includes the following information about the scenario analysis s Data collected NIV Outcome Probability CP GO 0.15 Most Ott 4.5 milion 12.11 Probability (P) Outcome Pessimistic Most likely Optimistic Data Collected NPV; -$2.31 million $4.53 million $12.11 million -$0.04 million $0.75 million $2.25 million Complete the missing information in Martina's re $5.93 million The expected net present value of the project is 52.31 million 50 Most likely Optimistic $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 $5.18 Standard deviation of the net present value (the NPV of the project is likely to vary by) million
