Sensitivity analysis

Because if the revenue changes, then so too does the profit change, and therefore so too will the tax change. If the revenue increases by (say) $100, then the profit will increase by $100, and therefore the tax on the profit will increase by (if the tax rate is say 30%) $30. So the resulting increase in the cash flow will be 100 - 30 = 70.

Yes we do :-)

You are welcome :-)

We take the expenses net of the tax saving (so deduct it).

:-) you are welcome :-)

what is the importance of sensitivity analysis to capital investment appraisal?

All the figures used in the calculations are estimates. Sensitivity analysis identifies the most critical of the estimates. I suggest that you watch my free lectures on this. The lectures are a complete free course for Paper F9 and cover everything needed to be able to pass the exam well.