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Financial Management

5. What is a sensitivity analysis?

6. What is a scenario analysis?

7. How would you apply each one to a potential investment opportunity?

8. How would you use the information from this analysis? Explain.
What are some risk management techniques?

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Financial Management

Answer 5

Sensitivity analysis is a measure utilized for the assessment of risk involved in a project. It mainly assesses the impact of different variables on the returns of an investment. It is utilized for the assessment of the impact of the changes in the critical variables, on the project profitability. It renders the data about the estimated project parameters and assists in the estimation of risk and error involved in the project (Sensitivity Analysis, 2008).

Answer 6

Scenario analysis is a measure that utilized for the evaluation of the combined effect of different variables (scenarios). Since the variables involved in an investment are interrelated, there are alters in combination. So, the scenario analysis assists in analyzing the risk associated with different scenarios. It assists the decision makers regarding the consideration of different scenarios and their significance in ...

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This response addresses the queries posed in 529 Words, APA References

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