Guided Walkthroughs
Full DCF — Step 8 of 12: Compute terminal value the first way — Gordon growth, with a 3.0% perpetuity growth rate.
Model answer
Gordon growth TV (valued as of end of Year 5) = UFCF Year 5 × (1 + g) / (WACC − g) = 19.5 × 1.03 / (0.10 − 0.03) = 20.085 / 0.07 ≈ $286.9M. Mechanics to say out loud: you grow the final-year FCF one…
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More from Guided Walkthroughs
- Full DCF — Step 1 of 12: Set up the model. SteadyCo has $100M of revenue in Year 0. What operating assumptions do you need before you can project unlevered free cash flow, and what are ours?
- Full DCF — Step 2 of 12: Project SteadyCo's revenue and EBITDA for Years 1–5.
- Full DCF — Step 3 of 12: From EBITDA, get to EBIT and NOPAT for each year. Why does a DCF tax EBIT rather than pre-tax income?
- Full DCF — Step 4 of 12: State the unlevered FCF formula and compute Year 1 unlevered FCF for SteadyCo.
- Full DCF — Step 5 of 12: Complete the 5-year unlevered FCF projection.
- Full DCF — Step 6 of 12: Build SteadyCo's cost of equity. Inputs: risk-free rate 4.0%, equity risk premium 5.0%, levered beta 1.4.