Terminal Value Sensitivity

This question practices how to diagnose whether a discounted cash flow model is being driven too heavily by terminal value instead of the forecast period. Candidates need to think through the structure of a DCF, how the explicit forecast period and terminal assumptions interact, and why a valuation can become distorted if the business has not been modeled long enough or if long term growth assumptions are too aggressive. Interviewers ask this because it tests judgment, modeling intuition, and the ability to spot when a valuation may be unreliable or overly dependent on a single input.