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Sensitivity and scenario analysis Different techniques of project risk analysts involve different input variables and assumptions. The procedure in which one of the elements affecting
Sensitivity and scenario analysis Different techniques of project risk analysts involve different input variables and assumptions. The procedure in which one of the elements affecting the expected value is changed to study its effect on the expected value is called analysis. Diana is a risk analyst. She is conducting a sensitivity analysts 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. This curve implies that the project Is very sensitive to changes in the price of the product. The project's NPV is likely to become negative d the price for which the product can be sold decreases by Along with the sensitivity analysis, Diana 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 Complete the missing information in Diana'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. Assuming that probability distribution is normal, the value of z is. Thus, the project has a chance to generate an NPV of less than $0
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