| Abstract: | The financial evaluation of capital investment projects is made using one or more of the conventional techniques such as payback period, accountant's rate of return, net present value and discounted cash flow rate of return. These techniques are generally used by firms to provide one ‘most likely’ estimate of the project's performance expressed in terms of its pay back period, rate of return or net present value. This approach fails to take into account the extent of the uncertainty or risk associated with the project. This paper presents the nature and scope of risk and sensitivity analyses. A case study on the application of risk and sensitivity techniques is also included. |
