Which example best illustrates a 2D sensitivity analysis?

A 2D sensitivity analysis involves evaluating how multiple variables affect a particular outcome simultaneously, typically displayed in a matrix format. The example of IRR vs. exit cap rate AND ADR growth best embodies this concept, as it examines the interaction between two independent variables—exit capitalization rate and average daily rate (ADR) growth—and their combined effect on the internal rate of return (IRR).

In this case, both the exit cap rate and ADR growth can significantly impact overall returns, and exploring these two factors together allows for a more comprehensive understanding of how varying conditions affect performance. By analyzing multiple variables at once, stakeholders can make more informed decisions regarding their investments and strategies.

The other options illustrate sensitivity analysis in different contexts but do not fully capture the essence of 2D analysis. For example, while IRR vs. construction costs examines the effect of a single variable on IRR, it does not incorporate a second variable. Similarly, occupancy vs. interest rates focuses only on those two dimensions but doesn't interact with another outcome as effectively as option B does. CapEx vs. market shifts also tends toward a single-variable focus rather than exploring the combined effects, making it less illustrative of a 2D sensitivity analysis.