Which One of These Is a Disadvantage of Sensitivity Analysis

question 23

Multiple Choice

Which one of these is a disadvantage of sensitivity analysis?

• A)Sensitivity analysis may decrease the false sense of security among managers.
• B)Sensitivity analysis fails to identify the key variable that affects a project's net present value.
• C)Each variable in sensitivity analysis is treated in isolation.
• D)A sophisticated computer program is required to conduct sensitivity analysis.
• E)Sensitivity analysis assumes most variables will achieve their most optimistic value.

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Definitions:

Degrees Of Freedom

The number of independent values or quantities which can vary in the analysis without violating any constraints.

Margin Of Error

An expression of the amount of random sampling error in a survey's results, which describes a confidence interval’s radius around a survey’s result within which the true population parameter lies.

Population Standard Deviation

A measure of the dispersion or spread of all values within a population, quantifying how much the values differ from the population mean.

Sample Size

The number of observations or replicates included in a statistical sample, essential for accurately estimating the population parameter.