Sensitivity analysis in making capital investment decision.
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Sensitivity analysis in making capital investment decision.

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Published by National Association of Accountants in [New York] .
Written in English


  • Capital investments

Book details:

Edition Notes

SeriesNAA research monograph, 3
LC ClassificationsHG4028 C4 H6
The Physical Object
Number of Pages86
ID Numbers
Open LibraryOL17518223M

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  Sensitivity analysis is a calculation procedure that predicts the effects of changes of input data. Investment decisions are wracked with uncertainty and risk. Most investment models have explicit and implicit assumptions about the behaviors of models and the . The greater the amount of reliable information, the more likely it is that sensitivity analysis will lead to a good decision-oriented choice of a strategy. In this respect, the deci­sion support systems play a great role as these can provide right information at the right time for the purpose of sensitivity : Shital P. As per the requirement of the decision-making area, the variables, and their types would differ. Accordingly, the parameters are decided and the sensitivity analysis is conducted. Sensitivity Analysis, among other models, is put much more to use as a decision support model than merely a tool to reach one optimal solution. Meaning of Sensitivity Analysis. Sensitivity analysis is a management tool that helps in determining how different values of an independent variable can affect a particular dependent variable. It can be useful in wide range of subjects apart from finance, such as engineering, geography, biology, etc.

Sensitivity analysis is a good technique for forecasting the attention of management on critical variable and showing where additional analysis may be beneficial before finally accepting a project. It does not directly measure risk and it is limited by only being able to examine the effect of a change in one variable, while the others remaining constant, an unlikely occurrence in : Shivani A. Investment Decision Analysis The investment decision process: • Sensitivity analysis. - How sensitive are the criterion to changes in key assumptions. Lecture: IV 2 flows, and book value of investment instead of market value (which is more realistic).File Size: 36KB.   Sensitivity analysis is a financial model that determines how target variables are affected based on changes in other variables known as input variables. This model Author: Will Kenton. Sensitivity Analysis - Analysis of the effects of changes in sales, costs, etc. on a project. Decision Trees - Diagram of sequential decisions and or dispose of a capital investment project 1. Option to expand 2. Option to abandon Size: KB.

In capital budgeting many different criteria are used for evaluating a project, measuring economic efficiency, and making decisions. Net Present Value (NPV) is considered the most theoretically reliable tool, since it correctly measures shareholder value creation (Brealey, Myers, , Cited by: 6. Additional Physical Format: Online version: House, William C. Sensitivity analysis in making capital investment decisions. [New York] National Association of Accountants []. The degree of (in)coherence is calculated with Spearman () correlation coefficient and Iman and Conover () top-down coefficient. We focus on the class of AIRRs (Magni , ) and show that the average Return On Investment (ROI) enjoys strong NPV-consistency under several (possibly all) methods of Sensitivity by: 6. Sensitivity analysis is “an integral part (Celemen, )” of any decision-making process accompanied by the creation of a decision-support model (see also Saltelli, Tarantola, and Campolongo.