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- This topic has 3 replies, 2 voices, and was last updated 2 years ago by John Moffat.

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- May 14, 2022 at 1:26 pm #655633
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.May 14, 2022 at 2:59 pm #655639You 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.

May 15, 2022 at 3:00 am #655658Thanks for the help. Please, how may I access the free lecture you made mention of. Perhaps you could provide me with the link. Thanks.

May 15, 2022 at 9:41 am #655674If you click on ‘ACCA’ in the top bar of this page, and then choose ‘FM’ in the new bar that appears, you will get to the main Paper FM pages that has links to all of our free Paper FM resources including our lectures and lecture notes.

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