Sensitivity analysis

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May 8, 2017 at 6:10 am #385301
myacca1990
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I was reading a text about sensitivity analysis topic and could not understand the sensitivity analysis of a cost of capital.
The project IRR was 18.56% and the cost of capital was 8%.
“The cost of capital can therefore increase by 132% before the NPV becomes negative”
What does this line means?
May 8, 2017 at 11:42 am #385332
John Moffat
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You really should watch the free lectures on sensitivity, because I explain this in the lectures!

The increase is 18.56 – 8 = 10.56.
As a % of the current cost of capital this is 10.56/8 x 100 = 132%
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