Sensitivity analysis is:

A. The NPV when sales and other input variables are set equal to their most likely values.
B. A risk analysis technique that considers both the sensitivity of NPV to changes in key variables and the likely range of variable values.
C. A risk analysis technique that considers the sensitivity of NPV to changes in key input variables.
D. The NPV when "bad" and "good" sets of financial circumstances are compared.

Correct Answer: C

Sensitivity analysis indicates how much the net present value of an investment project will change in response to changes in an input variable.