Section outline

  • Each valuation is the result of many assumptions. In this section, we learn how to deal with the fact that some of these assumptions could be affected by measurement error. We learn how to use scenario analysis, sensitivity analysis, and Monte Carlo simulations to study the relevance of measurement error and to express firm value as an interval rather than a point estimate. Properly applied, these analyses transform a valuation exercise into a very valuable management tool.

    • The section's reading assignment and review questions are listed below:

    • Reading: Coping with Measurement Error Book
      Students must
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    • Quiz: Measurement Error
      Students must
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      Receive a grade