Cross-Check a DCF Terminal Value
Compare the growth and exit approaches through the assumptions each implies.
Terminal approaches · given and implied inputs
Synthetic example · EUR thousands; rates and multiples as labeledGiven and implied assumptions
| Input / result | Growth | Exit |
|---|---|---|
| Growth · % | 2.00 | 3.15 |
| EBITDA multiple · × | 6.7734 | 8.0000 |
| Terminal value | 6,502.50 | 7,680.00 |
| PV terminal value | 4,885.42 | 5,770.10 |
| Enterprise value | 6,059.50 | 6,944.18 |
Free · No signup
The link opens your DCF workspace. The illustrated example is not loaded automatically.
Do the two terminal approaches tell a consistent story?
Use the shared synthetic DCF Valuation Model with 2026–2028 annual FCFF 445, 467.50 and 510 in EUR thousands. Terminal-year EBITDA is 960; WACC is 10%, valuation date January 1, 2026 and convention year-end. Normalization is off and the direct next-year FCFF override is blank. The task is to compare the terminal economics, not solve for a target enterprise value.
Compare the two supplied terminal assumptions
Perpetual growth is 2%. Next-period FCFF is 510 × 1.02 = 520.20, producing growth-method terminal value 520.20 / (10% − 2%) = 6,502.50. The alternative exit assumption is 8× EBITDA, producing terminal value 960 × 8 = 7,680.00. Both occur after 2028 and use the same explicit forecast.
Terminal Value explains how those methods are constructed. These terminal amounts are not enterprise value: discounting and the explicit-period cash flows still need to be included. The table separates terminal value, terminal PV and total EV.
Two methods · growth input / implied multiple; exit input / implied growth
| Input / result | Growth | Exit |
|---|---|---|
| Growth · % | 2.00 | 3.15 |
| EBITDA multiple · × | 6.7734 | 8.0000 |
| Terminal value | 6,502.50 | 7,680.00 |
| PV explicit FCFF | 1,174.08 | 1,174.08 |
| PV terminal value | 4,885.42 | 5,770.10 |
| Enterprise value | 6,059.50 | 6,944.18 |
Implied exit multiple: translate the growth result
The engine divides growth terminal value by the applicable terminal metric: 6,502.50 / 960 = 6.7734× EBITDA. This is the implied exit multiple of the 2% growth result, not a new trading observation. It is lower than the independently entered 8× exit assumption.
A growth assumption that implies a high multiple relative to genuinely comparable evidence deserves investigation. The product supplies no live market benchmark and makes no automatic judgment that 6.7734× is reasonable. Use Trading Comparables for your own evidence, with matching metric period and economic basis.
Implied perpetual growth: translate the exit result
For this unnormalized, no-override case, the native implied growth calculation is (exit TV × WACC − final FCFF) / (exit TV + final FCFF). Here (7,680 × 10% − 510) / (7,680 + 510) = 3.1502%. Substituting that growth into the same final-FCFF extension produces the 7,680 terminal value.
The entered exit multiple of 8× therefore implies more perpetual growth than the supplied 2% under this specific cash-flow basis. It does not prove that growth will occur. With operating normalization or a direct next-year FCFF override, the product instead holds next-period FCFF fixed and calculates WACC − next-period FCFF / exit TV. Inspect the state before comparing implied growth values.
Reconcile the valuation gap and decide what to review
Growth-method EV is 6,059.50; exit-method EV is 6,944.18. The difference 884.67 equals the terminal-value gap 1,177.50 discounted over three years at 10%. Explicit FCFF present value remains 1,174.08 in both cases.
The next review question is whether growth, reinvestment and the chosen multiple describe compatible steady-state economics. Terminal Value Normalization repairs an unusual anchor year. DCF Sensitivity Analysis tests neighboring assumptions; Football Field Valuation compares method ranges. Agreement between methods would be an internal consistency check, not independent validation.
Reproduce the native implied outputs
1. Download the existing synthetic DCF example, open the DCF model and explicitly use Manage models → Import. In Model, switch to Advanced before editing, then return to Value or Deals as appropriate. A blank workspace may first show Activate; the example file already has the relevant tool active. The CTA opens your workspace and never imports the example automatically.
2. Keep reported basis, normalized unlevered EBIT tax, first forecast 2026, terminal anchor 2028, terminal date after 2028, WACC override 10%, valuation date 2026-01-01 and Year-end. Keep operating normalization off and Next-year FCFF override blank.
3. In Terminal value select Perpetuity growth, enter growth 2% and read the Implied exit multiple. Then select Exit multiple, use EBITDA and multiple 8, and read Implied perpetual growth. Compare both terminal values and enterprise values with the tables. The file already stores the alternative multiple even when the growth method is selected.
Cross-check boundaries
The implied outputs translate the two existing terminal approaches under their configured cash-flow basis. This is not reverse DCF, goal seek, a general solver or automated solve-for-target valuation. An internally consistent result can still rely on unsupported forecasts or unsuitable peer evidence. Displayed values are rounded; the engine retains full precision.