What to use as perpetuity growth rate?
Is there a formula to calculate this with justification? Can you use average revenue growth from last 10 years? I'm tired of just throwing in 2% inflation and calling it a day. Especially if company is clearly dying (old old brick and mortar store).
This is an unpopular opinion of mine, but perpetuity growth rates are kind of meaningless, because it all depends on the interplay of the discount rate with the perpetual growth rate. A 7% perpetual growth rate (which people would find insane) at a high discount rate would be equal to a 2% perpetual growth at a low discount rate.
I’ve previously written on this topic in depth at (https://www.wallstreetoasis.com/forum/off-topic/do-discount-rates-make-…) and was called a “stoner philosopher.”
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