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.
Emerald Group Publishing Limited
Dennis, Steven A; Smith, William Steven (2012). Financial Leverage, Project Equity, and Sensitivity of NPV. Emerald Group Publishing Limited 28 111-123. Retrieved from https://oaks.kent.edu/finpubs/7