Posted by Dave on October 30, 1999 at 08:32:21:
When doing a valuation using free cash flow to the firm (FCFF), it is possible to use a multiple to derive the terminal value. If the equation for FCFF is EBIT*(1-T) + Depreciation - Capital Expenditures - Change in Working Capital, is the terminal value derived using an exit multiple times EBIT*(1-T) in year 5 (assuming that year 6 would extend into perpetuity)? Furthermore, would you discount this terminal value back at the weighted average cost of capital (WACC)?
Post a Followup