Module II· Football Field & SensitivitiesIntermediate
Question
How do you construct a WACC sensitivity table for a DCF?
Answer
Standard 2x2 table
WACC in columns (e.g. 8.0% / 8.5% / 9.0% / 9.5% / 10.0%), terminal growth in rows (1.5% / 2.0% / 2.5%). Each cell: EV at that combination of assumptions. The pivot value (center cell) = base case. Ranges: typically ±50bps and ±0.5% around the base.
Deep diveShow more details
Example
Base WACC 9%, g 2% → EV $1,000m. At WACC 8.5% / g 2.5% → EV $1,130m (+13%). At WACC 9.5% / g 1.5% → EV $890m (−11%). Range $890–1,130m.
Pitch tip
Senior MDs check the sensitivity range for plausibility: if the range is $700–1,500m, the method assumptions are too shaky.