Sensitivity Analysis

Determines how sensitive then NPV values are to changes in the inputs For instance if sales Volumes fall by 10% how much will NPV's fall by. Or if the cost of capital increases by 10% how much will the NPV's fall by

Sensitivity does not measure risk

Example take the NPV of the project and divide it by the annuity rate and find by how much revenue have to fall or costs have to rise for the project to be unviable

Take that annuity sum and divide it by certain figures to determine how much they have to change like FC's etc