DCF & WACC
A reasonable terminal value cross-check question: your exit multiple is 10x EV/EBITDA but the implied perpetuity growth comes out to 5%. What does that tell you and what do you do?
Model answer
A 5% implied perpetual growth rate is too high - it exceeds long-run nominal GDP, so it implies the company eventually outgrows the entire economy, which is impossible in perpetuity. It signals your…
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