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Sir can you please explain the percentage fall in selling price of product for which NPV falls to zero
Examiners answer is very confusingIt is the same as calculating the sensitivity of the selling price.
The only thing that will change is the PV of the revenue flows, and this needs to fall by the amount of the NPV for the NPV to fall to zero. So the sensitivity is the NPV of the project expressed as a % of the PV of the revenue flows.
See my free Paper FM lectures on sensitivity for a full explanation of how and why (because this is revision from Paper FM) 🙂
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