ACCA PM · Chapter 9 · Question 9 of 11
A project has a net present value of $50,000. The present value of sales revenue is $400,000. By what percentage could the selling price fall before the project's NPV becomes zero (the sensitivity of the project to selling price)?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) 12.5%
Explanation
Sensitivity = NPV / PV of the cash flow concerned = $50,000 / $400,000 = 12.5%. If selling prices fell by more than 12.5%, the NPV would become negative, assuming all other variables are unchanged.
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