Module II· DCF — Terminal ValueIntermediate
Question
How do you cross-check between the Gordon and exit-multiple methods?
Answer
Compute the mutual implied values.
- From a Gordon TV → implied exit multiple = Gordon TV / terminal year EBITDA. Compare with the current trading-comps range.
- From an exit-multiple TV → implied g backed out of the Gordon formula (simplified: g ≈ WACC − FCF/TV). Compare with long-run GDP. If the implied values are plausible → the DCF is consistent. On a large divergence: one of the methods has implausible assumptions.
Deep diveShow more details
Pitch tip
the standard slide in a DCF pitch has two columns — Gordon and exit multiple — both with a cross-check of the implied values. Senior MDs look closely at this.