Framework

Choose the method by asking what evidence is stronger.

Gordon Growth relies on a stable cash flow story. Exit Multiple relies on a market pricing story.

1

Check maturity

Is the company stable by the terminal year? If not, extend the forecast or add a transition period.

2

Select method

Use Gordon Growth when long-term cash flows are reliable. Use Exit Multiple when comparable market pricing is strong.

3

Calculate future value

Calculate Terminal Value at the end of the final forecast year.

4

Discount to today

Use the terminal year discount factor.

5

Sense-check

Compare the result with explicit value, peer multiples, growth, margins, and risk.

Gordon Growth Method

TV = Final Year FCFF × (1 + g) / (WACC − g)

Best when the company is mature, stable, and has a realistic long-term growth rate.

Exit Multiple Method

TV = Terminal Year Metric × Exit Multiple

Best when comparable companies or transaction multiples provide defensible market evidence.