ACCA FM · Chapter 9 · Question 7 of 8
A project has an initial investment of $250,000 and an NPV of $30,000. By what percentage could the initial investment increase before the project ceased to be worthwhile?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) 12.0%
Explanation
The initial investment occurs at time 0, so its present value equals its cost. Sensitivity = NPV / PV of investment = 30,000 / 250,000 = 12.0%. Dividing by the PV of inflows (280,000) gives 10.7%, which is the sensitivity of the inflows, not the investment.
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