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What is sensitivity analysis? For an investment opportunity with a positive expected NPV, how can the...

  1. What is sensitivity analysis? For an investment opportunity with a positive expected NPV, how can the results from sensitivity analysis be used to determine whether or not to invest?
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Sensitivity analysis is a statistical modelling procedure proceduret that measures how different changes in the independent variable contribute to changes in the dependent variable due to uncertainty of outcomes.

If an investment outcome has a positive NPV, due to certain positions and positive values of cash flows, a sensitivity analysis can be done if different market conditions like boom , recession etc can have an impact on the profitability of the investment and overall if the NPV will stay positive or not

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