Terminal Value too High; What to do?

1. Maybe project out more periods
2. What terminal value method are you using? Use the other one. See if you get a similar value. If you are way off, some of your assumptions are probably off (growth rate too high, WACC too low, exit multiple too high - these are the most obvious).

What's your terminal multiple and how did you derive it? How early stage is the company?

1. Perpetuity growth rate may be too high (if that's the method you're using), or your multiple may be too high. One tip here is to use one method to back into the other. For example, if you're using the multiples method, work backwards and solve for the assumed perpetuity growth rate.

2. How does your terminal year EBITDA or FCF compare to the prior years? Ideally, your terminal year is when the cash flows are stable and not at a cyclical high or low.

I'm just doing some modeling practice. The company is The Cooper Companies Inc.

I use both Perpetual Growth and Exit Multiple back to back to see the implied growth rates / exit multiples. I'm playing around with 3-4% growth rate. The company's LTM EBITDA multiple is 23x. If I use that, it's way too high so I'm using 21, but the TV is still 87% of EV.

I also calculated my own beta and got 0.78, whereas Yahoo! Finance gives 0.51. I don't know what they used to calculate that I did my own calculations.