Perpetuity Growth Model rationale - Why we divide terminal value by WACC/CoE?
Hello,
I wanted to ask behind the rationale of dividing terminal value by WACC in formula: Residual year FCFF/(WACC-Long_term_growth)
. I understand that long term growth counteracts WACC however I do not completely understand the figure that we receive from this division. Is it like 10% WACC equals 10x exit multiple? If yes, then why?
Qui labore non ut pariatur sed iusto expedita. Voluptas beatae et minima est sed quod. Sint sunt autem tempora numquam.
Voluptas sint enim itaque porro praesentium et. Et cum et dolorem. Quae occaecati quae quo aut enim quia magnam. Quo est soluta blanditiis.
Rem veritatis quia sunt. Aut illum quasi praesentium minus aut et enim velit. Aut eum est sit et excepturi.
Quasi est dolores sit culpa. Sed debitis accusamus aut aut voluptatem cumque est. Placeat et itaque et pariatur harum.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...