Sensitivity & scenario analysis
A project's NPV is the present value of five years of free cash flow, FCFₜ = Sales₀(1 + g)ᵗ · margin, discounted at r. A tornado flexes one driver at a time to rank impact; a scenario moves correlated drivers together.
Base-case NPV$80.6m
Base-case NPV $80.6mMost-sensitive driver Base-year salesValue range (top driver) $72.6m → $88.7m
Base-year sales$100m
Sales growth g6.0%
Operating margin18.0%
Discount rate r10.0%
Swing per driver (± of value)±10%
Flexing each driver by ±10% one at a time, Base-year sales moves NPV the most: $72.6m → $88.7m (a $16.1m span). The widest bar sits on top, so the diagram ranks impact, not likelihood.
Try this
Which driver tops the tornado? Then switch to scenarios: the optimistic-to-pessimistic spread dwarfs any one bar because the moves stack.
Reflect: a tornado shows how much NPV moves if one assumption is wrong, holding the rest fixed. A scenario asks what happens when assumptions go wrong together. Neither attaches a probability. What would you add to turn impact into expected value?