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I have a question which requires that I conduct sensitivity analysis for the risk and return of a project with focus on the cost, benefit and return (NPV) of a proposed investment. However, I’m having difficulty in applying the sensitivity formula, especially how to determine the Present value of the variables since the figures for each years are different.
For instance, the cost in year 1-5 of the project are of different values and I know to get the PV it is calculated as:
DCF @ COC * Cost value. Please, how then do I calculate the sensitivity of the project to cost at the end of the 5th year using the sensitivity formula below;
NPV/PV of cost
I eagerly anticipate your response. Thanks.You would calculate the PV of whatever the cost is at time 5, and then express the NPV as a % of this PV.
Have you watched my free lectures on sensitivity analysis? The lectures are a complete free course for Paper FM and cover everything needed to be able to pass the exam well.
Thanks for the help. Please, how may I access the free lecture you made mention of. Perhaps you could provide me with the link. Thanks.
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