dea Assignment bue Wecnesday 0.10.18 at 1145 Attempts . Measuring stand-alone risk Aa When projects involve certain, or constant. cash flows, the capitallbudgeting analysis thatican be conducted is very simple and straightfonward. unfortunatety, this type of project rarely exists. Whem a projects cash nows, or the conditions that affetr ther magnitucte or timing, vary from their expected values, then the analysis becomes more complicated. Projerts that have the potential to exhibit greater or lesser levels of risk than the firm's average, or normal, level means that adjustments should be made to the capital budgeting analysis proceS Several techniques are used to assess the stand-alone risk which reflects the uncertainty about the project's cash flows. Some of these techniques are: (1) sensitivity analyss, ca) scenano anarysis, land (3) Monte Carlo simulation. When lai firmilis penforming a sensitivity or a scenario analysis on a proiect., 't wal generate a wh em it uses the most ikielv values for ites key variabies in its calculations. base case net present value (NP bestrcase scenario is a nsk analysis technique that uses sophisticated sotware to analyze a large number of scenarios and generate estimated rates of return and risk indleses