When using the scenario approach,an analyst should not shortcut the process by deducting the face value of debt from the scenario-weighted value of operations,because this would seriously underestimate the equity value,as the value of debt is different in each scenario.

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The value of debt is different in each scenario, therefore deducting the face value of debt from the scenario-weighted value of operations would not accurately calculate the equity value. It is important to consider the value of debt in each scenario when using the scenario approach.

When Using the Scenario Approach,an Analyst Should Not Shortcut the Process