An analysis that breaks the net present value (NPV) calculation into its component assumptions and shows how the net present value (NPV) varies as one of the underlying assumptions changes is called .....

CAPITAL BUDGETING

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

An analysis that breaks the net present value (NPV) calculation into its component assumptions and shows how the net present value (NPV) varies as one of the underlying assumptions changes is called ____

A	scenario analysis
B	internal rate of return (IRR) analysis
C	accounting break-even analysis
D	sensitivity analysis

Explanation:

Detailed explanation-1: -Scenario analysis breaks the net present value (NPV) calculation into its component assumptions and shows how the net present value (NPV) varies as each one of the underlying assumptions changes.

Detailed explanation-2: -C) Scenario analysis considers the effect on net present value (NPV) of changing multiple project parameters.

Detailed explanation-3: -Answer and Explanation: The answer is D) sensitivity analysis. Apart from scenario analysis, sensitivity analysis would test how NPV changes when one of related variables either increases or decreases.

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CAPITAL BUDGETING