← Back to Tools

Terminal Value Sanity Checker

Cross-reference your Exit Multiple assumptions against the implied Perpetual Growth Rate to avoid modeling impossible valuations.

JavaScript Required: This interactive calculator requires JavaScript to function. Below is the static mathematical framework.

Inputs

Final Year FCF ($M)

Final Year EBITDA ($M)

Discount Rate / WACC (%)

Assumed Exit Multiple (x)

Terminal Value (Exit Mult Method)

Implied Perpetual Growth Rate

If this rate exceeds long-term GDP growth (usually ~2.5%), your exit multiple assumption is likely too aggressive.

The Math

The Sanity Check: Analysts often apply a historical Exit Multiple to Terminal Year EBITDA to find Terminal Value. But doing so implicitly assumes a perpetual growth rate into infinity.

Implied Growth Math:

g = ((TV × WACC) - FCF) / (FCF + TV)

If you use a 15x Exit Multiple, the implied perpetual growth rate might be 5%. Since the global economy grows at ~2-3%, assuming a single company grows at 5% forever is mathematically impossible, meaning your 15x multiple is too high.