Ace the 2025 Certified Materials Maestro Exam – Resources Ready, Set, Go!

Question: 1 / 400

What analysis technique should a manager use to assess changes in cash flows on a project's net present value?

Risk analysis

Scenario analysis

Sensitivity analysis

Sensitivity analysis is the most appropriate technique for assessing how changes in cash flows impact a project's net present value (NPV). This method involves evaluating how sensitive the NPV is to variations in key input variables, such as cash inflows, outflows, and discount rates. By systematically adjusting one variable at a time while keeping others constant, a manager can pinpoint which factors have the most significant effect on the NPV, allowing for better-informed decision-making.

Sensitivity analysis not only highlights the degree of impact variations have on the project's viability but also helps in understanding the risk associated with those variations. This makes it a crucial tool for managers trying to optimize project returns and minimize financial risks.

Get further explanation with Examzify DeepDiveBeta

ROI analysis

Next Question

Report this question

Download Certified Materials and Resource Professional Practice PDF Study Guide
Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy