Q. Which of the following statements about sensitivity analysis is false?
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(A)
Sensitivity analysis allows the decision maker to direct search effort by highlighting variables which, when they change by a small percentage, have a large impact on NPV.
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(B)
Sensitivity analysis can be used to highlight variables of greatest significance to NPV, which then allows monitoring in the implementation phase and the drawing up of contingency plans.
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(C)
Sensitivity analysis allows decision makers to be more informed about project sensitivities, to know what room they have for judgemental error and decide whether they are prepared to accept the risks.
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(D)
Sensitivity analysis permits the decision maker to change all the variables simultaneously and thereby examine a project in various different circumstance
✅ Correct Answer: (D)
Sensitivity analysis permits the decision maker to change all the variables simultaneously and thereby examine a project in various different circumstance