Question

We have the following variables have been evaluated at a percentage variation of 20%, the results...

We have the following variables have been evaluated at a percentage variation of 20%, the results are as follows Sales = Causes a variation of 40% in the NPV Cost of sales = Causes a variation of 35% in the NPV Adm. Expenses = Causes a 2% variation in NPV Which variable has greater sensitivity?

Sales

Costs of sale

Administration expenses

None

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Answer #1

The variable which will be causing the most percentage of deviation will be having the maximum volatility and maximum sensitivity.

So as it is seen that sales is having a variation of 40% of net present value, so the sales is a highly sensitive factor in deciding the net present value of the company, so, the sensitivity of the sales will be highest as in comparison to other factors, because they are lesser than sales percentage in terms of sensitivity and deviation.

Other options are stating incorrect factors.

Correct answer is option (A) Sales.

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