Explain in your own words the concept of the sensitivity analysis in 2 paragraphs.

Solutions

Expert Solution

Sensitivity analysis is used to calculated how a change in one of the variables to the inputs affects the final decision and the final answer to a financial problem.For example, it is widely used in the calculation of net present value (NPV). In the calculation of the net present value we have many variable inputs like number of units, the variable cost of each unit, the price of each unit, fixed costs of each unit,etc. We use all these inputs to calculate the net present value of a project to decide on the feasibility of the project.

We use the sensitivity analysis to analyse three case scenarios: the best case, the worst case and the base case. The base case analysis is considered normal sales and that would happen at all times. In the best case analysis, we increase the quantity of units sold, reduce costs and increase prices, these variables are changed and then we do the sensitivity analysis for the best case scenario. In the worst case analysis, we decrease the quantity of units sold, increase costs and reduce prices, these variables are changed and then we do the sensitivity analysis for the worst case scenario. This is how sensitivity analysis is used.

jeff jeffy answered 10 months ago

Next > < Previous

Related Solutions

Explain in your own words the concept of the sensitivity analysis.

In your own words submit a narrative (200 words/2 paragraphs for each) and explain each of...

In your own words submit a narrative (200 words/2 paragraphs for each) and explain each of the following seven (7) operational philosophies found in leisure-service agencies. Include an example to illustrate each philosophy. Which mix of these seven orientations would be most compatible, in your opinion, to a typical municipal recreation and park department's philosophy? Quality-of-Life Approach Marketing Approach Human Services Approach Prescriptive Approach Resource Manager/Aesthetic/Preservationist Approach Hedonist Approach Benefits-Based Approach

In your own words, explain, the difference, between the concept of ANOVA/ANCOVA with the concept of...

In your own words, explain, the difference, between the concept of ANOVA/ANCOVA with the concept of MANOVA/MANCOVA. Include in your explanation, what type of research question one might use the statistical concepts over the other. Include in your explanation the advantage and disadvantage of each.

Explain in 3 paragraphs in YOUR OWN WORDS what functional medicine is.

explain in your own words the concept of the time value of money.

In your own words, explain the concept of corporate entrepreneurship. Under this concept, what is expected...

In your own words, explain the concept of corporate entrepreneurship. Under this concept, what is expected of the corporation? What is expected of the employees in such an entrepreneurial organization? Do you have the knowledge, skills and attitude to behave like an “entrepreneur” within a corporation (a corporate entrepreneur)? Explain why so? Big Bang Disruption is affecting the fields of Education, Healthcare, Transportation (Taxi Services) and Travel -Lodging (Hotels). Explain with examples of new businesses (or new ventures).

Research the concept of “externalities” and explain in your own words, the idea of an externality....

Research the concept of “externalities” and explain in your own words, the idea of an externality. (The Wikipedia entry on externalities is a good source. Skip the mathematical definition.) (15 points) List five examples of externalities, preferably from engineering projects, processes, inventions, or products. You must be specific, - what is the technology or process and what is the resulting social impact. Do not cut and paste or copy from Wikipedia. Be creative and interesting with your examples. Your list...

Question