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What are the different variables in sensitivity analysis?

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter11: Venture Capital Valuation Methods

Section11.3: Earnings Multipliers And Discounted Dividends

Problem 3CC

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Question

What are the different variables in sensitivity analysis?

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Answer:

Under a given set of expectations, a sensitivity analysis describes the way different values of an independent variable influence a specific dependent variable.

In other words, it is a forward projection tool employed by managers to effectively handle the risks inherent in planning and budgeting, It is also referred as what if analysis.

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