Assumptions in financial models

Financial modeling is useful, but it can also be incredibly arbitrary. In computing discounted cash flows, adjusting assumptions by a few basis points can dictate whether people will invest in a project or company.

But, just because you can "measure" something with more precision doesn't mean that the data is inherently more meaningful or that it will lead to better decisions. In fact, it may create false confidence, another form of risk. Imperfect comparables make adjusting discount rates from 10% to 10.312% seem disingenuous at best.

Unfortunately, I haven't thought of good alternatives (for people dependent on Excel) yet. But, a Monte Carlo simulation that adjusts growth rates from year-to-year instead of holding them constant seems like a good place to start. In concept, people agree, but they're hesitant because they don't know how to implement them in Excel.