Question of the day
2026-07-14
In a value-creation bridge, why is the EBITDA-growth contribution typically valued at the ENTRY multiple while the multiple-expansion contribution is valued at the EXIT EBITDA?
Answer it out loud first — like you would in the room. Then check yourself:
Reveal the model answer
Model answer
It's a convention to avoid double-counting the cross term (ΔEBITDA × Δmultiple). Exit EV − Entry EV = (ΔEBITDA × entry multiple) + (Δmultiple × exit EBITDA). The growth bucket holds the multiple fixed at entry; the multiple bucket then applies the full multiple change to the larger exit EBITDA, which absorbs the cross term. Equivalently you can value growth at exit multiple and multiple change at entry EBITDA — the point is to assign the cross term consistently to one bucket so the layers sum exactly to total EV change.
Want 10 of these a day, scheduled so they stick?
A free account gets you Daily 10 — ten questions a day from the full 2,000+ bank, spaced-repetition scheduled. No credit card.