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Explain the concept of sensitivity analysis

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Question - Understanding the cash flows that will result from a capital budgeting project as well as the risk involved is a very important responsibility of the financial manager. We often use historical data, when available, to conduct the necessary analysis but when a project is under consideration and represents a new idea, historical data will not exist.

In approximately 150 words, respond to the following questions by explaining the concepts as well as citing one strength and one weakness of each:

Explain the concept of sensitivity analysis and indicate one strength and one weakness of this type of analysis.

Explain the concept of scenario analysis and indicate one strength and one weakness of this type of analysis.

Reference no: EM132997087

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