Which of the following is NOT a valid DCF sensitivity pair?

• A. Terminal Multiple vs Long-Term Growth Rate
• B. Revenue Growth vs Terminal Multiple
• C. Terminal Multiple vs Discount Rate
• D. EBITDA Margin vs Terminal Multiple

Answer: (C)

In a DCF sensitivity, you test how changes in key drivers affect value, and terminal value is the big driver you focus on. There are two ways to compute that terminal value: a perpetuity growth model that uses a long-term growth rate, and an exit multiple method that uses a terminal multiple times a trailing metric (like EBITDA). Those are alternative approaches, not components you’d mix in a single sensitivity. So pairing a terminal multiple with a long-term growth rate isn’t a coherent two-variable sensitivity because it blends two different terminal-value frameworks. The other pairings are sensible: varying the terminal multiple and the discount rate shows how present value responds to changes in both the terminal assumption and the discounting; varying revenue growth with the terminal multiple makes sense if the terminal value is based on a metric like EBITDA or revenue multiplied by a multiple; and varying EBITDA margin with the terminal multiple also fits since the terminal EBITDA base is affected by the margin.