SENSITIVITY ANALYSIS Sensitivity analysis is the process of varying the assumptions underlying a decision to determine the decision's sensitivity to those assumptions. It enables managers to assess how responsive NPV is to changes in key variables that are used to calculate it (Drury 1996). Some of the factors that influence the NPV of multinationals are taxes, exchange rates, estimating the terminal value of a project using different methodologies, political risk and the real operating options (Buckley 2000). …
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