Sensitivity Analysis Measures a Project's Stand-Alone Risk by Showing How

question 37

True/False

Sensitivity analysis measures a project's stand-alone risk by showing how much the project's NPV (or IRR) is affected by a small change in one of the input variables, say sales.Other things held constant, with the size of the independent variable graphed on the horizontal axis and the NPV on the vertical axis, the steeper the graph of the relationship line, the more risky the project, other things held constant.

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Definitions:

Cathexis

An investment of emotional significance in an activity, idea, or object.

Psychic Energy

In psychoanalytic theory, a force primarily associated with the libido or the energy of the unconscious mind.

Psycho-motor Energy

A term related to the connection between mental processing and physical movement.

Homeostasis

The process by which a living organism or system maintains stable internal conditions necessary for survival, despite changes in the external environment.