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You agree? To conduct a sensitivity analysis, hold all projections constant except one. Alter that one, and see how sensitive cash flows (and NPV) are
You agree?
To conduct a sensitivity analysis, hold all projections constant except one. Alter that one, and see how sensitive cash flows (and NPV) are to the change - the point is to get a fix on where forecasting risk may be especially severe.
You may want to use the Worst-case/Best-case idea for the item being varied.
Common exercises include varying sales, variable costs, and fixed costs.
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