US CMA Part 2 · Chapter 8 · Question 12 of 15
A financial analyst recalculates a project's NPV several times, changing only the sales volume assumption each time while holding all other inputs constant, to see how much NPV changes. This technique is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Sensitivity analysis
Explanation
Sensitivity analysis changes one input at a time to see how responsive the outcome is, identifying the variables that matter most. Scenario analysis changes several inputs together to reflect consistent states such as best, base and worst cases. Monte Carlo simulation draws thousands of random combinations of inputs from probability distributions.
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