1. Open Access Kent State
  2. Financial Leverage, Project Equity, and Sensitivity of NPV
Author(s)
Abstract

We develop two new measures for assessing project uncertainty in sensitivity/scenario analyses. For sensitivity analysis, we develop the “Z% Elasticity Coefficient,” building on the elasticity concept in economics. For scenario analyses, we develop the “Proportionate Range.” Both are substitutes for employing mean–variance (of Net Present Value or NPV) analysis, which has been criticized for assessing project uncertainty. The appendix provides examples of computing each measure for a hypothetical project.
Format
Article
Publication Date
2012-01-01
Publication Title
Emerald Group Publishing Limited
Volume
28
First Page
111
Last Page
123
Keywords
Subject
Rights
https://rightsstatements.org/page/InC/1.0/
Community
Department of Finance
Permalink https://oaks.kent.edu/finpubs/7
Dennis, S., & Smith, W. (2012). Financial Leverage, Project Equity, and Sensitivity of NPV (1–). Emerald Group Publishing Limited. https://oaks.kent.edu/node/1793
Dennis, Steven, and William Smith. 2012. “Financial Leverage, Project Equity, and Sensitivity of NPV”. Emerald Group Publishing Limited. https://oaks.kent.edu/node/1793.
Dennis, Steven, and William Smith. Financial Leverage, Project Equity, and Sensitivity of NPV. Emerald Group Publishing Limited, 1 Jan. 2012, https://oaks.kent.edu/node/1793.