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Module II· WACC & Capital StructureAdvanced
Question

How large is the WACC sensitivity in a typical DCF — and how do you show it in the pitch?

Answer
Rule of thumb

A ±50bps change in WACC → a ±5–7% change in EV in a standard DCF. ±100bps → ±10–14%. Sensitivity increases with forecast length and growth rate. Standard sensitivity slide in an IB pitch: a two-variable table with WACC (columns: 8.0%, 8.5%, 9.0%, 9.5%, 10.0%) and g (rows: 1.5%, 2.0%, 2.5%) — showing the EV range. The Football Field reflects this: the DCF range comes mainly from the WACC bandwidth.

Deep diveShow more details
Pitch tip

Standard footnote on a DCF slide — 'EV sensitivity: ±50bps WACC moves EV by $X (±Y%); ±0.5% terminal growth moves EV by $Z'. Senior MDs look closely there.

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