Make the simplified model explicit
Suppose next year’s free cash flow to the firm is 10 units and is assumed to grow perpetually at 3%, with an 8% discount rate. The simplified perpetuity value is 10 / (0.08 − 0.03) = 200 units. It assumes stable growth, risk and reinvestment economics.
See what moves the answer
Holding that next-year cash flow and growth rate fixed, a 9% discount rate produces about 166.67 units. Holding the 8% rate fixed but reducing growth to 2% also produces about 166.67. A neat table reveals sensitivity; it does not establish which assumptions are defensible.
Move from sensitivity to scenario
A business slowdown could change revenue growth, margins, working capital and financing conditions together. A scenario should link those changes. Moving only the growth cell leaves the rest of the business unchanged and answers a narrower question.
Finish the claim being valued
Enterprise value is not automatically the amount belonging to common shareholders. Apply a documented bridge for debt, cash, other claims and dilution, with consistent definitions. Then explain the range through business evidence rather than implying the midpoint is a forecast.
A learning example, not a market recommendation. Work through the assumptions before applying any model.
Found an error or an explanation that needs a closer look?
Suggest a correction