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What is the purpose of scenario and sensitivity analysis in valuation?

  1. A Testing how the result changes with different assumptions, revealing which drivers matter most
  2. B Guaranteeing accuracy
  3. C Reducing the discount rate
  4. D Simplifying the model
Answer

Testing how the result changes with different assumptions, revealing which drivers matter most

A single point estimate conveys false precision. Showing the range and its drivers is far more useful to a decision maker.

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