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Brandt Enterprises is considering a new project that has an estimated NPV of $800. The assistant to CFO conducted a sensitivity analysis with regard to
Brandt Enterprises is considering a new project that has an estimated NPV of $800. The assistant to CFO conducted a sensitivity analysis with regard to sales price and salvage value. The results are documented in the table below:
Sales price change by | -30% | -15% | 0 | 15% | 30% |
NPV results | 579.2 | 724 | 800 | 876 | 1051.2 |
Salvage value change by | -30% | -15% | 0 | 15% | 30% |
NPV results | 624 | 780 | 800 | 820 | 984 |
The assistant needs to explain what sensitivity is and what the results mean. Can you help to explain the above two issues?
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