DCF & WACC
Worked example: WACC is 10%, perpetuity growth is 2.5%, terminal-year FCF is 150 and terminal-year EBITDA is 250. Compute the Gordon growth TV and the implied exit multiple, then judge it.
Model answer
TV = 150 x (1.025) / (0.10 - 0.025) = 153.75 / 0.075 = 2,050. Implied exit multiple = TV / terminal EBITDA = 2,050 / 250 = 8.2x EV/EBITDA. Judgment: compare 8.2x to where comparable companies trade…
The full, human-reviewed answer is in the bank.
Sign up free and Daily 10 serves you 10 questions a day from all 2,300+ — or go Pro for unlimited reps.
Pro unlocks every model answer — $19.99/mo.
More from DCF & WACC
- Walk me through a DCF.
- Why do you use unlevered free cash flow in a DCF and how do you calculate it?
- What is WACC and how do you calculate it?
- What are the two ways to calculate terminal value, and how do they differ?
- What discount rate do you use if you're discounting levered free cash flow?
- Two identical companies, one has more debt. Which has the higher WACC?
Try the real thing
1 / 3LBO & Paper LBO
What is a leveraged buyout?
Superday coming up? Take the cheat sheet.
The technicals and stories to have cold before you walk in — free, one email, no mailing list.
Free tier: 20 cards + 10 daily reps + ALL drills — no credit card required.