Series 79 practice questionmediumDCF - Sensitivity Analysis
Which pair of assumptions is most commonly sensitized because both can materially affect terminal value and the resulting DCF valuation?
- AHistorical revenue and audit fees
- BWACC and the perpetual growth rate✓ Correct answer
- CShare count and dividend date
- DBook depreciation and par value
Explanation
Why B — WACC and the perpetual growth rate
DCF sensitivity tables commonly vary WACC and perpetual growth because both directly affect terminal value and present value. The relative impact of either input cannot be ranked without specifying equal changes and the model's starting assumptions.
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