DCF & WACC
Worked example: terminal-year EBITDA is 300, exit multiple is 9.0x, terminal-year FCF is 180, WACC is 9%. What perpetuity growth rate does the exit multiple imply, and is it reasonable?
Model answer
TV = 300 x 9.0 = 2,700. Solve the Gordon formula for g: g = (TV x WACC - FCF) / (TV + FCF) = (2,700 x 0.09 - 180) / (2,700 + 180) = (243 - 180) / 2,880 = 63 / 2,880 = 2.19%, roughly 2.2%. That sits…
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