Sensitivity Analysis

Overview

A sensitivity analysis is shown below. This shows how the payback period changes from varying one input variable at a time.

Worksheet Elements

The worksheet has various elements. These are described further below:

Graph

The graph near the top just illustrates the fact that a sensivity analysis is usually for seeing how an ouput might vary to varying just one (rather than several) input(s) at a time.

Baseline Inputs

This section shows how the payback period (and net contribution) varies, from changing each input variable one at a time, from their baseline value. Two different states are shown for each variable. If the baseline value is -5%, and the change for the state is -2%, the absolute value of the variable, in the particular state would be -7% - and this would be fed into the model.

Gravity Table

This Gravity Table ranks the input variables, based on the resulting percentage change to the Payback period - ranked from smallest change (or most negative change), to the most positive change in the Payback period. (The ranking is based on the change in the Payback period, from State 1).

Tornado Chart

Finally, the graph at the bottom, graphically shows the percentage change to the Payback period, from two State changes to each Input variable. This basically allows you to see which input variables have the most impact to the Payback period, and which are therefore more important to maintain control over (if you can).