Sensitivity analysis in evaluating project risk

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Reference no: EM13953787

For the given cash flows below, assume the cash flow is the same in the next 2 years. Compute the NPV for each project, and compute the incremental IRR. Compare and explain why NPV always gives the correct decision.

Project Initial Investment Year 1 Cash Flow

A 500,000 125,000

B 500,000 120,000

Question: Compare and contrast the uses of break-even analysis and sensitivity analysis in evaluating project risk.

Reference no: EM13953787

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