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Sensitivity Analysis In contrast to scenario analysis, sensitivity analysis holds all variables except one constant. This allows us to see how changes in one variable affects the NPV of a project. In this case, we will perform sensitivity analysis using fixed costs, although all other variables could be similarly examined. Using Excel, sensitivity analysis is most easily completed using a one-way data table. Below, you will see a table with the NPV for different levels of fixed costs: Fixed costs NPV 1.291,000,000 1,391,000,000 1,491,000,000 1.591,000,000 1.691,000,000 1.791,000,000 1,891,000,000 1.991,000,000 2,091,000,000 2.191,000,000 2.291,000,000 Graphically, the relationship between fixed costs and NPV looks like this: Of course, in our sensitivity analysis, we could be interested in how the NPV changes when two input variables change. Price and quantity sold are two variables that would seem to be related since a higher cost would likely result in fewer units sold. In this case, we can use a two-way data table to compute the NPV for changes in both of these variables. (Two-way data tables were introduced in Chapter 4.) The sensitivity analysis for price and units sold looks like this: 1,700,000 1.800,000 1.900,000 Price per Unit 2,000,000 2,100,000 2,200,000 2.300,000 Units Sold 2.750 2,800 2.850 2,900 2.950 3,000 3,050 3,100 3,150 3.250 3,350 Break-Even Point Usina Accounting Numbers Sensitivity Analysis In contrast to scenario analysis, sensitivity analysis holds all variables except one constant. This allows us to see how changes in one variable affects the NPV of a project. In this case, we will perform sensitivity analysis using fixed costs, although all other variables could be similarly examined. Using Excel, sensitivity analysis is most easily completed using a one-way data table. Below, you will see a table with the NPV for different levels of fixed costs: Fixed costs NPV 1.291,000,000 1,391,000,000 1,491,000,000 1.591,000,000 1.691,000,000 1.791,000,000 1,891,000,000 1.991,000,000 2,091,000,000 2.191,000,000 2.291,000,000 Graphically, the relationship between fixed costs and NPV looks like this: Of course, in our sensitivity analysis, we could be interested in how the NPV changes when two input variables change. Price and quantity sold are two variables that would seem to be related since a higher cost would likely result in fewer units sold. In this case, we can use a two-way data table to compute the NPV for changes in both of these variables. (Two-way data tables were introduced in Chapter 4.) The sensitivity analysis for price and units sold looks like this: 1,700,000 1.800,000 1.900,000 Price per Unit 2,000,000 2,100,000 2,200,000 2.300,000 Units Sold 2.750 2,800 2.850 2,900 2.950 3,000 3,050 3,100 3,150 3.250 3,350 Break-Even Point Usina Accounting Numbers
