| Course | FNCE 4101 Corporate Finance |
|---|---|
| Week | Week 7 |
| Paper type | Sensitivity analysis |
| Length | About 760 words, 5 pages |
| Format | APA 7 student paper |
| School | Walden University |
| Program | BS in Business Administration |
| Updated | October 2026 |
Free sample paper for FNCE 4101 Week 7
How Much Does Halvorsen's Value per Share Depend on Terminal Growth? A Seven-Column Sensitivity Table From 1.5 to 4.5 Percent, the Break-Even Rate Against a $30 Price and a Ranking of Four Inputs
Student Name
Walden University
FNCE 4101: Corporate Finance
Instructor Name
Month Day, Year
How Much Does Halvorsen's Value per Share Depend on Terminal Growth? A Seven-Column Sensitivity Table From 1.5 to 4.5 Percent, the Break-Even Rate Against a $30 Price and a Ranking of Four Inputs
The Model Being Tested
The base valuation of Halvorsen, a composite listed company, discounts five years of free cash flow to the firm, starting at $109.6 million and growing 4 percent a year, at the 8.5 percent blended rate from Week 5, then adds a terminal value for all later years using a constant growth rate. Subtracting net debt of $510 million, the $570 million market value of bonds less $60 million of cash, and dividing by 60 million shares gives value per share. With terminal growth of 3.0 percent, the base value is $27.24 a share, against a market price of $30.00.
The Sensitivity Table
Value per share nearly doubles across the range, from $20.99 to $38.17, as terminal growth moves three percentage points. The effect is not even: each half-point step adds more than the last, because terminal value grows faster as the growth rate approaches the discount rate. The $30.00 market price is matched at terminal growth of about 3.5 percent. In other words, buyers at $30.00 are assuming Halvorsen's cash flows will grow at roughly 3.5 percent a year forever after year 5, slightly above the long-run nominal growth of the U.S. economy.
Table 1
Value per Share at Seven Terminal Growth Rates (WACC 8.5 percent)
| Terminal growth rate | 1.5 percent | 2.0 percent | 2.5 percent | 3.0 percent | 3.5 percent (break-even) | 4.0 percent | 4.5 percent | |
|---|---|---|---|---|---|---|---|
| Terminal value (millions) | 1,933.5 | 2,092.5 | 2,278.0 | 2,497.2 | 2,760.2 | 3,081.8 | 3,483.6 | |
| Enterprise value (millions) | 1,769.3 | 1,875.1 | 1,998.4 | 2,144.2 | 2,319.2 | 2,533.0 | 2,800.3 | |
| Value per share | $20.99 | $22.75 | $24.81 | $27.24 | $30.15 | $33.72 | $38.17 | |
| Terminal value share of enterprise value | 72.7% | 74.2% | 75.8% | 77.5% | 79.2% | 80.9% | 82.7% | |
Composite company. Present value of years 1 to 5 is $483.5 million in every column. The break-even column, where value is closest to the $30.00 price, is the exact break-even rate of about 3.48 percent rounded to the nearest step.
Ranking the Inputs
Figure 1
Swing in Value per Share Across Each Input's Plausible Range
Each bar is the difference between value per share at the high and low ends of the range, holding the other inputs at base values. Terminal growth: $20.99 to $38.17. WACC: $35.21 to $21.72. Base cash flow: $23.98 to $30.50. Near-term growth: $24.24 to $30.47.
What the Ranking Shows
Two inputs dominate. Terminal growth and the discount rate each move value per share by $13 to $17 over plausible ranges, more than double the effect of the other two. Both work through the terminal value, which makes up three-quarters or more of enterprise value in every column. The base year's cash flow and the near-term growth rate, the inputs analysts usually spend the most time forecasting, move the answer by only about $6.
This matches a warning in the valuation literature: terminal value usually accounts for most of a discounted cash flow valuation, so assumptions about the distant future drive the result more than detailed near-term forecasts do (Koller et al., 2020). Damodaran (2012) adds that a stable growth rate should not exceed the long-run growth rate of the economy in which the firm operates, which puts a practical ceiling near 4 percent on Halvorsen's terminal growth.
Limits of a One-at-a-Time Test
The ranking moves one input while holding the others at base values, which understates risk when inputs move together. In a recession, for example, Halvorsen's near-term growth, base cash flow and terminal outlook would all fall at once, and investors might also demand a higher return. A scenario that combines 2 percent near-term growth, 2.5 percent terminal growth and a 9.0 percent discount rate would put value per share at about $19.70, below every single-input low in the figure. The table and figure are best read as a guide to which assumptions deserve the most scrutiny, not as a range of likely outcomes.
What This Means for the Decision
An investor deciding whether Halvorsen is worth $30.00 should spend less time refining the five-year forecast and more time on two questions: can Halvorsen keep growing at about 3.5 percent indefinitely, and is 8.5 percent the right discount rate? A one-point error in either matters more than a large error in next year's cash flow. Given that 3.5 percent terminal growth is at the high end of what a mature industrial distributor can sustain, the table suggests the market price is optimistic but not unreasonable (Brealey et al., 2020).
References
Brealey, R. A., Myers, S. C., & Allen, F. (2020). Principles of corporate finance (13th ed.). McGraw Hill.
Damodaran, A. (2012). Investment valuation: Tools and techniques for determining the value of any asset (3rd ed.). Wiley.
Koller, T., Goedhart, M., & Wessels, D. (2020). Valuation: Measuring and managing the value of companies (7th ed.). Wiley.
The Walden FNCE 4101 Week 7 instructions
In Week 7 you test how sensitive a valuation is to its inputs. Build a table that moves one key input across a plausible range in even steps and reports the resulting value in each column. Mark the column where value equals the price under discussion. Add a second exhibit that ranks several inputs by how far each moves the answer over its own plausible range. In a short memo below, state which inputs matter most and why, note the limits of testing one input at a time and say what the results mean for a decision about the price.
How the FNCE 4101 Week 7 example is put together
The paper states the base model: five years of cash flow at 8.5 percent plus a growing perpetuity, less net debt of $510 million, over 60 million shares. The table moves terminal growth across seven columns and marks 3.5 percent as break-even, and the text notes that each step adds more than the last. A bar figure ranks terminal growth, the discount rate, base cash flow and near-term growth by their swings. The analysis explains that the first two work through terminal value, citing Koller and colleagues and Damodaran on a ceiling for stable growth. A limits section combines three inputs in a downside, and the conclusion, citing Brealey and colleagues, calls the price optimistic but not unreasonable.
Reading the FNCE 4101 Week 7 rubric
Sensitivity analyses are graded on construction, interpretation and judgment. The table should vary one input across a realistic range in even steps and show the resulting values clearly, with the break-even point identified. A second exhibit that ranks inputs by their effect shows the student can distinguish important assumptions from minor ones. Strong analyses explain why certain inputs dominate, such as their effect on terminal value, and acknowledge that one-at-a-time tests understate joint risk. The conclusion should turn the results into advice about which assumptions deserve the most scrutiny. Ranges that are implausibly wide or narrow undermine the analysis.
Common FNCE 4101 Week 7 mistakes, and how to avoid them
Choose the input you think matters most and pick a plausible low and high value, then fill the steps between. Compute value at each. Find where value matches the price and mark it. Then pick three or four other inputs, give each a plausible range and record how far value moves at the ends. Rank them. Ask why the biggest movers matter so much; usually they act through terminal value. Finally, try moving two or three inputs together in a bad scenario. Common errors are using ranges that are not comparable and reporting tables without interpretation. Share your model and we can help set sensible ranges. Keep the memo below the exhibits short, three paragraphs at most, with the finding in the middle one. The exhibits should carry most of the argument.
Get a FNCE 4101 Week 7 example written to your instructions
Forward the Week 7 prompt and your rubric, along with the base case model if your section supplies one, and the table is rebuilt around those inputs. First sample free, back within 24-48 hours. The exhibit widens to two variables at once whenever a prompt asks for a grid rather than a single row.
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FNCE 4101 Week 7 questions, answered
Where can I find a free FNCE 4101 Week 7 sample paper?
The seven-column table, the input ranking and the memo are open on this page at no cost.
How much does value per share change in the FNCE 4101 Week 7 table?
From $20.99 at 1.5 percent terminal growth to $38.17 at 4.5 percent.
Where is the break-even point?
At about 3.5 percent terminal growth, where value matches the $30.00 market price.
Which inputs matter most?
Terminal growth and the discount rate, which move value by $13 to $17 a share over plausible ranges.
Why do those two dominate?
Both work through the terminal value, which makes up three-quarters or more of enterprise value.