What is the primary objective of conducting a sensitivity analysis in the context of decision-making?
Question 2
In a decision tree, if a sensitivity analysis reveals that a small change in the probability of a key event causes the optimal decision to switch from Option A to Option B, what does this indicate?
Question 3
Consider a decision where the expected value of an outcome is calculated as $EV = P \times V$, where $P$ is the probability and $V$ is the value. If $P$ is initially $0.4$ and $V$ is $250$, what is the expected value? If $P$ changes to $0.5$, what is the new expected value?
Question 4
Which of the following scenarios would most strongly suggest the need for a sensitivity analysis?
Question 5
A project has an expected net present value (NPV) of $750,000$. A sensitivity analysis is performed on the initial investment cost, varying it from $1,000,000$ to $1,300,000$. If the NPV remains positive across this entire range, what does this indicate about the project?
