Incorporating risk into investment appraisal

FFaraz3y ago

Hello Sir I hope you are doing well I am little bit confused, I studied that sensitivity analysis is for uncertainity, and recently I saw in past papers it is also included in incorporating risk methods. Can you confirm can we take sensitivity analysis while mentioning about methods or ways to incorporate risk into investment appraisal? Another thing can we use probability analysis, risk adjusted wacc, simulation as well? Thanks!

John MoffatTutor3y ago#1

Although strictly risk and uncertainty are not quite the same thing, as far as the exam is concerned they are. It is the fact that there is uncertainty that makes an investment risky. All those methods are relevant (as explained in my free lecture on investment appraisal under uncertainty).

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