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Based on the results of the tornado diagram, we can advise our friend on whether to invest in the project or what to do next
Based on the results of the tornado diagram, we can advise our friend on whether to invest in the project or what to do next in the analysis. If the tornado diagram shows that the NPV is positive for a wide range of input variables, then the project is likely a good investment. If, however, the NPV is negative or close to zero for most of the input variables, then further analysis is needed to determine whether the project is worth pursuing. In this case, we cannot construct a tornado diagram without specific values for the cash flows in each period. However, we can provide general guidance on how to interpret the tornado diagram once it is constructed. If the tornado diagram shows that the NPV is positive for a wide range of input variables, then the project is likely a good investment. If, however, the NPV is negative or close to zero for most of the input variables, then further analysis is needed to determine whether the project is worth pursuing. Explanation: Additionally, our friend may want to consider the risk of the project, given the wide range of cash flows estimated for each year. If the risk is
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