Sensitivity analysis: Group of answer choices indicates which variable(s) need to be most closely monitored. provides its user with the rate of return that corresponds to the project's IRR. provides limited information and therefore is rarely used in practice. is affected primarily by the interrelationships between project variables. is more difficult to conduct than simulation analysis.

Respuesta :

Sensitivity analysis (4) is affected primarily by the interrelationships between project variables.

What is sensitivity analysis?

  • The study of how the uncertainty in the output of a mathematical model or system might be partitioned and assigned to different sources of uncertainty in its inputs is known as sensitivity analysis.
  • Under a given set of assumptions, sensitivity analysis evaluates how different values of an independent variable affect a specific dependent variable.
  • In other words, sensitivity analyses investigate how different sources of uncertainty in a mathematical model contribute to the total uncertainty of the model.
  • Sensitivity analysis is a financial model that determines how changes in other factors, known as input variables, affect target variables.
  • This model is also known as what-if analysis or simulation analysis.

As is clearly mentioned in the definition that sensitivity analysis is a financial model that determines how changes in other factors, known as input variables, affect target variables.

Therefore, Sensitivity analysis (4) is affected primarily by the interrelationships between project variables.

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Complete question:

Sensitivity analysis:

  1. variable(s) need to be most closely monitored
  2. provides its user with the rate of return that corresponds to the project's IRR
  3. provides limited information and therefore is rarely used in practice
  4. is affected primarily by the interrelationships between project variables
  5. is more difficult to conduct than simulation analysis.