How does a change in interest rates impact valuation techniques?

A change in interest rates significantly impacts valuation techniques, particularly in the context of discounted cash flow (DCF) analysis. When interest rates fluctuate, they directly affect the discount rate applied to future cash flows. Higher interest rates typically lead to a higher discount rate, which reduces the present value of future cash flows. Conversely, lower interest rates result in a lower discount rate, increasing the present value of those cash flows.

This dynamic highlights the sensitivity of cash flow valuations to interest rate changes, making it essential for analysts to adjust their discount rates accordingly to reflect current market conditions. As a result, valuations can vary substantially depending on prevailing interest rates, underscoring the importance of incorporating these rates into financial analysis.

Other options do not accurately capture the role of interest rates in valuation techniques. Interest rates do have a tangible influence on discount rates used in cash flow valuations, making the selected answer the most appropriate choice.