How would companies benefit from running sensitivity analysis?How do they determine the most relevant items to evaluate?
Any project involves an estimate of costs and benefits, inputs to which are subject to uncertainties. For example for an uncertain variable, there could be pessimistic, expected and optimistic values
• Sensitivity analysis helps companies examine how the outcome of benefit-cost analysis changes when there are variations in inputs, assumptions or the manner in which analysis was initially set up
• Sensitivity analysis helps to measure economic impact resulting from alternative values of uncertain variables that affect the economics of the project ...
This solutions outlines the benefits of sensitivity analysis and steps to determining uncertainty in input variables are highlighted.