EOM1 Base Scenario

[stanley]

Hi guys,

How did you guys start the sensitivity test for the duration? I am not sure what "base scenario" to use. Here are my options

1. int=0, inf=0, cont=15% (ORIGINAL PROBLEM)
2 int=6, inf=0, cont=15%
3. int=6%, inf=equivalent inf to 15% contingency, cont=0

I am inclined to used the first option since these are the given at the start but statement number 4 in the memo states that "Sensitivity test the discount rate assp of 6% by assuming it changes to either 5 or 7." Which make me think that my "base scenario" could also be number 2 or 3.

Thanks for your help

[Mr Wadsworth]

I started the sensitivity test with my assumptions that I justified in my memo. I think it is less important what you start with as your base scenario than how well you justify yourself and caveat around the results based on your assumptions.