Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribed

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

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions

Question

Draw a schematic diagram of I.C. engines and name the parts.

Answered: 1 week ago