Question

The greater the degree of sensitivity of any one variable, the: 


Question 7 options:

	Less likely that variable is to cause potential losses if the estimated values are incorrect.
	Higher the net present value will be with an increase in any of the variables.
	Less slope the resulting net present value line will have when graphed against changes in that variable.
	More attention management should pay to the reliability of the estimates for that variable.
	Less important forecasting errors for that variable become.
	None of the above

Answer 1

when there would be a greater degree of sensitivity of any variable, then the management must be pay a higher amount of attention to the reliability of estimate for that variable because that variable is highly sensitive to changes and it will be leading to higher fluctuation in overall estimates so management should be proactive in order to manage fluctuation to determine the value appropriately.

other options are not correct because it is more likely that variable will cause potential losses and lower will be net present value with increasing the risk.

Correct answer will be option (d) more attention management should pay to the reliability of estimate for that variable.