Page 119 - 5.2 i. Manac Finance ITC Summarised Notes
P. 119
CAPITAL INVESTMENT APPRAISAL
Sensitivity Analysis
- Measures the change in the NPV or IRR of a project if the value of one of the key input
variables is changed. It is assumed all other variables will remain constant.
- I.e. how much can the:
- Initial capital outlay increase i.e. if any of the variables change more
- The discount rate increase than this the investment will no longer
- The residual value of the asset decrease be attractive (negative NPV).
- Operating cash flows decrease
So that the NPV is zero
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