Different techniques for analyzing project risk require different input variables and assumptions.

The procedure in which a set of key elements affecting the expected value are changed to study the effect on the expected value is called analysis.

Paloma 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.

Base case NPV (8. 5.9)

CURVE : (1.4, 6.9) (4.8, 6.4) (8, 5.9) and (13.4, 5)

This curve implies that the project is not very sensitive to changes in cost of capital. The projects NPV is likely to stay positive OR become negative ?? if the cost of capital increases to 15%. Along with the sensitivity analysis, Paloma 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 NPVj NPV j Probability (Pj P j )

Pessimistic $5.62 million 0.35 Most likely $7.94 million 0.30 Optimistic $16.45 million 0.35

Complete the missing information in Palomas report: The expected net present value of the project is ??

Standard deviation of the net present value (the NPV of the project is likely to vary by) million ??