Question
In the context of capital budgeting, what does sensitivity analysis do?
Multiple choice question.
It examines the sensitivity of profits to changes in market share.
It examines the increase in the cost of a project when the cost of capital increases.
It examines the sensitivity of management to the possibility that a project will be rejected.
It examines how sensitive a particular NPV calculation is to changes in underlying assumptions.
Multiple choice question.
It examines the sensitivity of profits to changes in market share.
It examines the increase in the cost of a project when the cost of capital increases.
It examines the sensitivity of management to the possibility that a project will be rejected.
It examines how sensitive a particular NPV calculation is to changes in underlying assumptions.
Answers
GPT-4o mini
In the context of capital budgeting, sensitivity analysis primarily focuses on assessing how sensitive a particular NPV (Net Present Value) calculation is to changes in underlying assumptions. Therefore, the correct answer is:
**It examines how sensitive a particular NPV calculation is to changes in underlying assumptions.**
**It examines how sensitive a particular NPV calculation is to changes in underlying assumptions.**