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Padmashree
All work
MS Finance, Saint Mary's College2026

Equity valuation sensitivity: Dollar General

What is Dollar General worth, and how sensitive is that to a few assumptions?

DCF + RI
two methods, cross-checked
2 drivers
WACC and terminal growth, live
ValuationDCFResidual incomeIllustrative data

What I found

Intrinsic value is a function of a handful of assumptions, and two of them do most of the work: the discount rate and the terminal growth rate. Small moves in either swing the answer by a lot, which is exactly why a single point estimate is not worth much on its own.

What I built

A discounted cash flow model with a residual-income cross-check. The DCF projects free cash flow and discounts it at WACC; the residual-income model values the same equity from book value plus economic profit. When two independent methods land near each other, the number is more defensible.

How it works

Move WACC and terminal growth and watch the intrinsic value respond. The residual-income estimate uses a cost of equity, so it reacts to terminal growth but not to WACC, which is a useful reminder that the two methods are not the same lens.

8.5%
6%12%
2.5%
0%4%
DCF intrinsic value
$131

At WACC 8.5% and terminal growth 2.5%, DCF value is 131 dollars per share, residual income 135 dollars, reference price 120 dollars.Residual income cross-check $135 · reference price $120

DCF value$131
Residual income$135
Reference price$120

Illustrative sample assumptions, not audited financials and not investment advice. Base free cash flow $1750M growing 6% for 5 years, 220M shares, $6000M net debt. Residual income uses a 9% cost of equity, so it responds to terminal growth but not to WACC.

Illustrative sample assumptions, not audited financials or investment advice.

Impact

  • A single estimate becomes a range, with the drivers of that range named.
  • The two methods cross-check near the base case, which is the signal that the assumptions are internally consistent rather than tuned to a target.

The transferable lesson

A valuation is only as honest as its assumptions. Show the sensitivity, name the two or three drivers that actually move the answer, and cross-check with a second method before you commit to a number in front of anyone.

This playbook uses clearly-labeled illustrative sample data, not proprietary figures. The method is the point.