Sensitivity analysis is a means of identifying those critical variables that if changed, could considerably impact profitability measures such as rate of return or net present value. Risk analysis identifies the likelihood of project failure and the subsequent cost to the investor.
In this lesson, sensitivity analyses for NPV, ROR, project life, and annual payments are practiced. Expected NPV and ROR are also explained to help analyze the effects of risk and uncertainty on the project economics.
Reminder - Complete all of the Lesson 6 tasks!
You have reached the end of Lesson 6! Double-check the to-do list on the Lesson 6 Overview page to make sure you have completed all of the activities listed there before you begin Lesson 7.