Sensitivity Analysis Lecture (1)


  • EXPECTED NPV

    • Simplest form involves probability distribution estimates:



      Forecast

      Probability

      Net Present Value

      Best case

      0.2

      €30,000

      Most likely

      0.7

      €20,000

      Worst case

      0.1

      €10,000

    • Expected NPV Calculation:

      • (0.2 x €30,000) + (0.7 x €20,000) + (0.1 x €10,000) = €21,000