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Forums › Ask CIMA Tutor Forums › Ask CIMA P1 Tutor Forums › Sensitivity Analysis Question
I am hoping you can help, I have watched the video on the topic however completing a Kaplan mock there is a question that I do not understand even with the workings. – I have both Kaplan and BPP books but cannot find any information RE this type of question to aid me.
What would the probability of a profit at which a managers decision to accept a project would change as a %
Profit 150000 Probability 40%
Loss -80000 Probability 60%
sorry should have said this is the answer:
P × 150) + [(1–p) × -80]
If EV falls to zero:
(P × 150) + [(1–p) × -80] = 0
150P -80 + 80P = 0
230P – 80 = 0
230P = 80
P = 0.3478 = 35%
however i am unsure on this formula as never seen this before so I do not understand the logic behind the workings