Discounting and value
Sensitivity analysis
Show how value changes with WACC and growth — and master mixed references.
18 minadvancedMembers
Learning objectives
- Build a two-way sensitivity table with mixed cell references
- Interpret how sensitive value is to WACC and growth
- Back out the discount rate a price implies
A valuation is only as good as its assumptions, so analysts present a range. A two-way sensitivity table recalculates value for combinations of the two inputs that matter most — typically WACC and terminal growth.
The trick is one formula copied across the grid. Mixed references make that work: $A6 locks the column (always read WACC from column A) and B$5 locks the row (always read growth from row 5).
Value = FCF₁ ÷ (WACC − g)
- FCF₁
- next year's free cash flow
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