B. Sensitivity analysis can be used in capital budgeting to determine how cash flows can be expected to vary with changes in the underlying assumptions. Sensitivity analysis is a "what if" technique. Using expected cash flows, the NPV, IRR, and PI of the project are determined. Then, the key assumptions that were used in making the original expected cash flow projections are identified. One assumption at a time is then changed, leaving the other assumptions unchanged, and the NPV, IRR and PI are recalculated to determine what effect changing one assumption would have on those measures.

C. Sensitivity analysis is used when cash flows are uncertain, as a means to determine what a change in one assumption will have on cash flows.

D. Sensitivity analysis does not measure the change in the discounted cash flows when using the discounted payback method rather than the net present value method. It can be used with any of the capital budgeting methods to determine how cash flows can be expected to vary with changes in the underlying assumptions.