Sanity Checks for EMM and PGM
Hi,
assuming the following:
Step I: I calculate the terminal value for my DCF via EMM using the (median) current LTM EBTIDA multiple from my trading comps. Subsequently I calculate the implied perpetuity growth rate which turns out to be 4%.
Step II: Now I calculate the terminal value via PGM and subsequently the implied exit multiple. If this implied exit muliple is in range with my chosen LTM EBTIDA multiple, I could see this as a confirmation that the chosen multiple is sensible.
Now - do I take my 4% implied perpetuity growth rate, plug it in Step II, and simply go on with the described calculation? Or do I choose a growth rate on my own (e.g. long term sector outlook)?
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