What would affect the valuation outcome of a DCF analysis?

The assumed growth rates and discount rates are critical components in a discounted cash flow (DCF) analysis, which fundamentally affects the valuation outcome.

The growth rate reflects the anticipated rate at which the company's cash flows are expected to increase over time. If the growth rate is estimated too high, it might lead to an overvaluation, while a lower growth assumption might indicate undervaluation. This rate directly influences the future cash flow projections, which are crucial to determining the present value of the company.

The discount rate is used to bring those future cash flows back to their present value, reflecting the risk associated with the investment. A higher discount rate reduces the present value of future cash flows, leading to a lower valuation, while a lower discount rate increases the present value and thus, the valuation.

Together, these assumptions significantly determine how investors perceive the value of the company, making them vital for accurate and credible DCF analysis.