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first blank scenario or sensitivty Ch 11: Assignment - Cash Flow Estimation and Risk Analysis Different techniques for analyzing project risk require different input variables

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first blank scenario or sensitivty

Ch 11: Assignment - Cash Flow Estimation and Risk Analysis Different techniques for analyzing project risk require different input variables and assumptions. The procedure in which one of the elements (or variables) affecting a project's expected value is changed to study its effect on the expected value is called analysis. Mina is a nisk 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 NPV (Millions of dollars) Base Case Units Sold 20 15 30 10 15 20 CHANGES IN UNITS SOLD (Percent) This curve implies that the project is very sensitive to changes in units sold. The project's NPV is likely to become negative if the number of units sold decreases by Along with the sensitivity analysis, Mina 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 NPV -$2.31 million $4.53 million $12.11 million Outcome Pessimistic Most likely Optimistic Probability (P) 0.50 0.35 0.15 Complete the missing information in Mina's 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

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