Good morning PrepLounge community,
My case partner warned me about not considering 'sensitivity analyses' at the end of my Business Plan, in a recent case. It's hard to actually make a sensitivity analysis without a computer, but it makes sense to at least suggest some points of analysis.
My doubt is: what is a potential answer to a "sensitivity analysis" question that must be (of course) back-of-the-envelope?
Potential answer example:
I'd like to investigate two areas:
A. Thresholds/Boundaries
A1. Price threshold
Understanding the P* or the Contribution Margin* at which the NPV of my investment is = 0
--> This gives me a sense of the lowest price/CM possible to make my NPV still not negative
A2. Demand threshold (similarly for Q)
A3. Market share threshold (similarly for Mkt %)
A4. Cost threshold (similarly for Costs)B. Volatility/Standard Deviation
A1. Price volatility
Understanding the standard deviation of P/MC
--> This can help me calculate a how many standard deviations I can 'accept' in P
A2. Demand volatility (similarly for Q)
A3. Market share volatility (similarly for Mkt %)
A4. Cost volatility (similarly for Costs)
Would this make sense? Any other aspects I should consider?
Thank you in advance!
TJ