Question:

What is a potential issue with basing terminal multiples on current public company multiples?

Answer hidden.

Answer:

The issue with basing terminal multiples 5-10 years out off of where public companies are trading today is that the median multiples may change drastically in 5-10 years.

The Multiples Method of determining Terminal Value is particularly problematic when dealing with cyclical industries such as construction, semi-conductors, or airlines.

To try and mitigate these issues, you usually look at a wide range of terminal multiples to see how the valuation changes.

Question:

What is a potential issue with basing terminal multiples on current public company multiples?

Answer:

Other

DCF

How do you calculate beta?

What happens to WACC as you increase leverage?

Walk me through a DCF

Walk me through how to get from Revenue to Unlevered Free Cash Flow in your DCF projections

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What happens if you use Levered Free Cash Flow instead of Unlevered Free Cash Flow in your DCF?

How do you calculate cost of equity?

How do you calculate WACC?

What is the mid-year convention and why would you use it in a DCF?

How do you calculate WACC for a private company?

Which company would we expect to have a higher beta, an industrials company or an internet company?

Would you expect the WACC to be higher for a $1 billion or $100 million market cap company?

Would you expect the cost of equity to be higher for a $1 billion or $100 million market cap company?

Why do you usually project out 5-10 years in a DCF?

What are the formulas for un-levering and levering Beta?

What is beta?

How do you select the appropriate exit multiple when calculating terminal value?

How do you determine the discount rate in a DCF?

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