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    Differences / similarities - sensitivity & scenario analysis

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    Discuss differences and similarities between sensitivity analysis and scenario analysis. Which method would you use if the purpose of analysis is to identify one or two key variables that have largest impact on the estimated NPV of a small project under consideration?

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    https://brainmass.com/business/net-present-value/differences-similarities-sensitivity-scenario-analysis-334580

    Solution Preview

    The similarities are that both methods are used to assess the standalone risk of the project. How the NPV will change if variables change.

    The difference is in how the variables change. In sensitivity analysis, one variable is changed at a time and the impact on NPV is noted. In scenario analysis, a lot of variables are changed simultaneously ...

    Solution Summary

    The solution discusses the differences and similarities between sensitivity analysis and scenario analysis.

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