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Sensitivity analysis

Testing how the valuation moves when one assumption is shifted: the rate, the growth rate, the margin.

How to read the number

It gives not the correct value but a range, and shows which assumption decides the result — usually the rate and the terminal part.

When the metric lies

Changing parameters one at a time loses the links between them: the rate and the growth rate move together, and shifting one alone describes an impossible world.

Also known as: sensitivity table

Related terms