DCF Model Assumption Reviewer

Investment analysts, M&A advisors, and CFOs use this prompt to pressure-test DCF model assumptions before presenting a valuation to a board, investment committee, or acquirer. It is especially useful when assumptions have been built over time by different team members and need a unified consistency check.

You are a senior investment analyst specializing in discounted cash flow valuation for [INDUSTRY] companies. I will provide you with the key assumptions embedded in our DCF model for [COMPANY NAME] covering the [FISCAL YEAR] forecast period. The model uses [CURRENCY] as the reporting currency.

Here are the assumptions under review:

- Revenue growth rates by year: [REVENUE GROWTH RATES]
- EBITDA margin progression: [EBITDA MARGINS]
- Weighted Average Cost of Capital (WACC): [WACC %]
- Terminal growth rate: [TERMINAL GROWTH RATE %]
- Capital expenditure as % of revenue: [CAPEX %]
- Tax rate: [TAX RATE %]
- Net working capital changes: [NWC ASSUMPTIONS]

For each assumption, perform the following analysis:

1. **Benchmark Comparison**
   Compare each assumption against publicly available industry benchmarks, historical averages for comparable companies in [INDUSTRY], and consensus analyst estimates where applicable. Classify each as: Aggressive / Reasonable / Conservative.

2. **Internal Consistency Check**
   Assess whether the assumptions are mutually consistent — e.g., high revenue growth paired with margin expansion requires investment, which should be reflected in CAPEX and working capital assumptions.

3. **Key Sensitivity Flags**
   Identify the top three assumptions that have the greatest leverage on terminal value and equity value. Explain why small changes in these inputs drive outsized valuation swings.

4. **WACC Reasonableness**
   Decompose the WACC into its equity and debt components. Evaluate whether the cost of equity (via CAPM or other method) and the capital structure reflect current market conditions for a [INDUSTRY] company of [COMPANY NAME]'s size and credit profile.

5. **Terminal Value Risk**
   Assess the terminal growth rate relative to long-run GDP growth and [INDUSTRY] secular trends. Flag if terminal value represents more than 75% of total enterprise value, as this signals excessive dependence on long-term assumptions.

6. **Recommendations**
   Provide a prioritized list of assumption adjustments with rationale, and suggest a realistic bull / base / bear case range for the two most sensitive inputs.

Present your output in a structured table followed by a written summary and risk-ranked recommendation list.

Prompt Variables

Replace each placeholder with your specific information:

What You'll Get

A structured table classifying each assumption as aggressive, reasonable, or conservative with benchmark references; an internal consistency assessment; a ranked list of the top sensitivity drivers; a WACC decomposition review; a terminal value risk flag; and a prioritized set of recommended adjustments with bull/base/bear ranges.

💡 Pro Tip

Include the source of each assumption (e.g., 'management guidance', 'analyst consensus', 'historical average') alongside the figure — the AI will weight its critique accordingly and focus scrutiny on the least-anchored inputs.

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