What would greater impact a firms valuation, a 10% reduction in revenues or 1% reduction in discount rate?
Thanks
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Why don't you set up the simplest 1-year model in Excel and check for your self. You can also run sensitivities on the growth and the discount rates. That won't take you a minute. Cheers.
Depends on the company's profitability and on the pre-existing discount rate in use, among other things.
the answer depends on many factors.
Dont you love guys like Ibguy LOL "Why don't you set up the simplest 1-year model in Excel and check for your self. You can also run sensitivities on the growth and the discount rates. That won't take you a minute."
NOTTTTT
if you dont want to answer the question Ibguy don't post! Some people forget that this is a DISCUSSION forum.
Chillax buddy. Sometimes it's a good thing to think/learn about something by trying it and struggling a bit. It depends on the operating leverage (fixed vs variable costs), profit margins, existing discount rate.
Financial leverage also plays a major role in valuation sensitivity here. Wouldn't want a 10% revenue dip ripping through your debt covenants.
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