Question

Sensitivity analysis:______.

a. is used for projects that cannot be analyzed by scenario analysis because the cash flows are unconventional.
b. helps identify the variable within a project that presents the greatest forecasting risk.
c. illustrates how an increase in operating cash flow caused by changing both the revenue and the costs simultaneously will change the net present value for a project.
d. looks at the most reasonably optimistic and pessimistic results for a project.
e. is generally conducted prior to scenario analysis just to determine if the range of potential outcomes is acceptable.

Answer 1

b. helps identify the variable within a project that presents the greatest forecasting risk.

Step-by-step explanation:

Sensitivity analysis refer to the financial model that measures how the variable i.e. target one should be impacted and depend on the change in the other variable that we called as an input variable

In this, it would help to identify the variable that lies within the project and provide the high risk of forecasting

Therefore the option b is correct