§ 01
AAPL — EV/EBITDA, Revenue Growth. Open AAPL on the Ledge to see current values.
§ 02
| Method | Formula | Best Used When |
|---|---|---|
| Gordon Growth | TV = FCFₙ × (1 + g) / (WACC − g) | Stable, mature businesses |
| Exit Multiple | TV = EBITDAₙ × Exit EV/EBITDA | When market comparables are available |
§ 03
Gordon Growth TV = FCFₙ × (1 + g) / (WACC − g)
§ 04
The perpetual growth rate (g) should NEVER exceed long-term GDP growth (2–3%). A company growing at 4% forever would eventually become larger than the entire economy — which is impossible.
§ 05
Calculate terminal value for a company using both methods. If they diverge by more than 30%, investigate which assumptions are driving the gap.
§ 06
Your DCF shows 75% of the total value comes from terminal value. Is this normal?
§ 07
§ 08
Your DCF: explicit 10-year forecast gives $40/share of value. Terminal value gives $110/share. Total $150. What's the most honest thing to say about this valuation?
Five questions · AI feedback
Sit with the ideas.
A DCF model projects Year 10 FCF of $500M. WACC is 9% and terminal growth rate is 2.5%. Using the Gordon Growth Model, what is the terminal value?
Why: