Worked example, Specialty Chemicals Co: terminal year FCF $60m, WACC 8.5%, g = 2%. Calculate the undiscounted terminal value (Gordon).

Inputs:

• Terminal year FCF: $60m
• g (steady state): 2%
• WACC: 8.5%
• Terminal year: Year 5 (end-of-year discounting)
• Terminal year EBITDA: $100m (for the sanity check)

Calculation:
```
TV = $60 × (1 + 0.02) / (0.085 − 0.02)
= $61.2 / 0.065 = $941.5m
DF Year 5 = 1 / (1.085)^5 = 0.6650
PV(TV) = $941.5 × 0.6650 = $626m
Sanity check: Implied Exit Multiple = $941.5 / $100 = 9.4x
```

If EBITDA is, say, $100m → implied multiple 9.4x — plausible for specialty chemicals (trading comps often 8–10x EBITDA).

If the implied multiple is unrealistically high or low → revisit the assumptions.