The discount rate that one applies in a multiple scenario valuation will usually be lower than the discount rate that would be applied to the business plan cash flows.

Question

Quizplus · Accepted Answer

The discount rate applied in a multiple scenario valuation is typically lower than the discount rate applied to the business plan cash flows because the multiple scenario valuation takes into account a range of possible outcomes, including both positive and negative scenarios. The discount rate applied to the business plan cash flows, on the other hand, is typically based on the expected cash flows of the business, which are more likely to be positive.

The Discount Rate That One Applies in a Multiple Scenario