Fundamentals of Capital Budgeting - Analyzing the Project

4 important questions on Fundamentals of Capital Budgeting - Analyzing the Project

What do you compute in a break-even analysis?

The break-even values of different parameters

What is the EBIT break-even value of a parameter? (Sensitivity Analysis)

The value a parameter has to take on in order to make EBIT to be equal to zero

Why can EBIT break-even be a misleading indicator?

Because a negative NPV is possible at EBIT break-even points
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What does a scenario analysis investigate?

The effect on NPV when multiple parameters change

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