Load-Bearing Assumption
A model input whose plausible range materially changes the output -- distinct from inputs that affect the answer by less than a few percent within their plausible ranges. Most DCF and LBO models have two or three load-bearing assumptions and a long tail of cosmetic inputs. Sensitivity analysis belongs almost entirely on the load-bearing assumptions; spending hours flexing inputs that do not move the answer is a misallocation of analyst attention. The tornado chart is the diagnostic for identifying which is which.
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Ambiguity Aversion · Anchored Assumption · Asset Beta · Bank ROE Spread · Banker Pitch Deck · Beta
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