November 29, 2011

Sensitivity Analysis

Engineering Economics Revision Article Series

Sensitivity analysis provides a second look at an economic evaluation.

Lurking behind every decision are "what if" doubts?

What if sales are less than forecasts?

What if a new, far better challenger becomes available?

Sensitivity analysis involves repeated computations with different cash flow elements and analysis factors to compare results obtained from these substitutions with results from the most likely scenario incorporated into the original plan.

Sensitivity analysis gives an estimate of the risk of the proposed decision.


Engineering Economics, 4th Edition, James L. Riggs, David D. Bedworth, and Sabah U. Randhawa, McGraw Hill, New York, 1996

Orinigally posted in

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