Scribd
Upload
33 views4 pages

Managing The Finance Function: Sensitivity Analysis: Bicol University College of Engineering Civil Engineering Department

This document summarizes a chapter about performing sensitivity analysis for finance functions. The learning objectives are to calculate measures of worth to explain sensitivity to parameter variation, choose better alternatives using multiple estimates, calculate expected values, and construct decision trees. Sensitivity analysis involves varying inputs to see how results change and determines what factors most impact decisions. Benefits are ease of calculation and understanding risk, while weaknesses are ignoring probabilities, variable interactions, and diversification gains.

Uploaded by

Salvador Nee
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
33 views4 pages

Managing The Finance Function: Sensitivity Analysis: Bicol University College of Engineering Civil Engineering Department

This document summarizes a chapter about performing sensitivity analysis for finance functions. The learning objectives are to calculate measures of worth to explain sensitivity to parameter variation, choose better alternatives using multiple estimates, calculate expected values, and construct decision trees. Sensitivity analysis involves varying inputs to see how results change and determines what factors most impact decisions. Benefits are ease of calculation and understanding risk, while weaknesses are ignoring probabilities, variable interactions, and diversification gains.

Uploaded by

Salvador Nee
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 4

Bicol University College of Engineering

Civil Engineering Department

Managing the
Finance Function:
Sensitivity
Analysis
BY:
HICRON IVAN MORTEGA
SALVADOR RYAN C. NEE ESTUYE
BRYAN PELICIA
JHON MICHAEL PION

LEARNING OBJECTIVES
Purpose: Perform a formal sensitivity analysis of one or more
parameters; and perform expected value and decision tree
evaluations of alternatives.
This chapter will help you:
1.
2.
3.
4.
5.

Calculate a measure of worth to explain sensitivity


to variation in one or more parameters.
Choose the better alternative using three
estimates for selected parameters.
Calculate the expected value of a variable.
Evaluate an alternative using the expected value
of cash flows.
Construct a decision tree and use it to evaluate
alternatives stage by stage.

Sensitivity Analysis
Sensitivity analysis means varying the
inputs to a model to see how the results
change
Sensitivity Analysis Answers the
question:
What does make a difference in the
decision?
Determining what does matters and what
does not requires incorporating sensitivity
analysis throughout the modeling process.

Sensitivity Analysis
Benefits
a. Easy to Calculate and Understand
b. Measures risk associated with individual
inputs

Weaknesses
c. Ignores probability of event
d. Ignores interaction among the variables
e. Ignores gains from diversification

You might also like