Sensitivity analysis

Sensitivity analysis presents a 5×5 grid showing how fair value moves under different combinations of two key driver assumptions. Our default grid is cost of equity (x-axis) versus terminal growth (y-axis), centered on the company's calculated values and stepping out by 50 basis points in each direction. The grid surfaces where the central fair-value estimate stops being defensible and where terminal-value sensitivity is highest. We always center the grid on the company's calculated cost of equity (not a hardcoded value), so the grid reflects the same Ke that flows into the DCF. For complex archetypes we run additional sensitivities — terminal P/E versus year-five EPS for forward-earnings models, ROIC versus reinvestment rate for residual-income models — and document the high-impact axes in the appendix. Sensitivity grids are diagnostic, not predictive: their value is in showing the analyst (and the reader) which assumptions deserve the most scrutiny.