Applied AI for Finance and Accounting · Module 10

Valuation & Scenarios: 6 Key Terms

By Devon Coombs, CPA, MBA · Teaching Professor of Finance, Santa Clara University · Reviewed August 2026

Valuation vocabulary centers on the discounted cash flow model, which estimates enterprise value by projecting free cash flow and discounting it at the weighted average cost of capital, or WACC. Terminal value often represents the largest share of estimated value in such a model, which is why sensitivity analysis and scenario testing matter so much in practice. Learners in the free Applied AI for Finance and Accounting course encounter these terms while building a valuation model and stress testing its assumptions.

These terms are taught in Module 10: Valuation Model and Scenario Engine of the free Applied AI for Finance and Accounting course; the full course glossary collects every chapter in one place.

Discounted cash flow (DCF)

A valuation that projects future free cash flows and discounts them to present value at a required rate of return.

Enterprise value

The total value of a business's operations, the sum of the present values of the forecast cash flows and the terminal value.

Free cash flow

Cash a business generates after operating costs and reinvestment: net operating profit after tax plus depreciation, less capital expenditure and the change in working capital.

Sensitivity analysis

Testing how an output such as enterprise value moves as key assumptions like WACC or terminal growth change.

Terminal value

The value of cash flows beyond the explicit forecast, often estimated with the Gordon growth model as a growing perpetuity.

WACC

The weighted average cost of capital, the blended required return used to discount a firm's free cash flows.

Put the vocabulary to work: the free calculators and decision guides apply these terms, and the free Applied AI for Finance and Accounting course teaches them in context.