Module II· Interview Essentials — ValuationIntermediate
Question
How do you defend an 'aggressive growth assumption' (15% CAGR) in your DCF?
Answer
Structured defense:
- Benchmarking: 'The 15% CAGR is consistent with the last 3 years of historical performance — no re-acceleration.' If there is re-acceleration: 'the growth acceleration is driven by [a new market / product launch / M&A pipeline] — quantifiable.'
- Peer comparison: 'The peer group's median growth rate is 12%, but our target has structural advantages from [X] that justify the 3% premium.'
- Decomposition: '15% breaks down into 8% volume growth (market growth + market-share gains), 3% pricing power, 4% M&A/cross-sell effects.'
- Sensitivity disclosure: 'We show a bear case at 10% CAGR — equity value down 30%. A bull case at 18% CAGR +25%.'
- Comparison to analyst consensus: 'Sell-side median is 13% CAGR — we're 200 bps more optimistic because of [our diligence finding].'
Deep diveShow more details
Pitch tip
NEVER use a growth assumption you can't decompose into 3 bullet points. The MD test: 'Break your 15% growth apart.' If you can't answer → fail.