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Define (a) sensitivity analysis, (b) scenario analysis, and (c) simulation analysis. If GE were considering two projects (one for $500 million to develop a satellite communications system and the other for$30,000 for a new truck), on which would the company be more likely to use a simulation analysis?
The main difference between these two analysis are how they change the values when doing the analysis. In sensitivity analysis, only one of the variables are changed. This means that the assumption is the other factors will be kept constant.
On the other hand, scenario analysis assumes that each factor is somehow connected to the other factors. This means that most of the values are changed but in a manner wherein they show correlation to each other.
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