Valuation Updated November 2026

Exit multiple

The exit multiple method sets terminal value = final forecast year metric x a market multiple, most often EV/EBITDA from comparable companies or deals. The result is an enterprise value at year n, discounted by (1 + WACC)^n like any other year n amount.

Syntax

TV = EBITDA_n x EV/EBITDA multiple

Examples

EBITDA_5 = 250, multiple = 7.0x
=250 * 7

Result: 1,750

PV of the terminal value at 10% over 5 years
=1750 / (1 + 10%)^5

Result: 1,086.61

Implied perpetual growth when TV = 1,750, WACC = 10%, FCF_5 = 150
=(1750 * 10% - 150) / (1750 + 150)

Result: 1.32%

Comes from solving TV = FCF x (1 + g) / (r - g) for g.

Common mistakes

Applying an equity multiple like P/E to get an enterprise terminal value: match the multiple to the metric (EV/EBITDA gives EV, P/E gives equity).
Using today's multiple in a hot market for a year 5 exit without asking whether it will hold.
Discounting the exit multiple TV at mid-year: with the mid-year convention, an exit multiple TV is still discounted at a full n years because the sale happens at year end.

Practice Exit multiple

These drills check your answer on live data, free, no account needed.

Terminal value by exit multipleValue the business assuming it is sold at the end of year 5 for the EBITDA multiple in B3. Fill the terminal value (B10), its present value (B11), the present value of the five cash flows using SUMPRODUCT (B12), enterprise value (B13) and the share of value that comes from the terminal value (B14).
Terminal value grid by rate and growthShow how sensitive the growth-based terminal value is. Fill B5:E8 with the final cash flow in B2 grown once by the growth rate in row 4, divided by the discount rate in column A less that growth rate.

Questions

What exit multiple should I use?

The median EV/EBITDA of comparable listed companies or recent transactions, often adjusted down a turn or two for a conservative case. Show a range in a sensitivity table.

How do I check an exit multiple against the perpetuity method?

Back out the implied growth: g = (TV x r - FCF_n) / (TV + FCF_n). If it is above 3% to 4%, the multiple is probably too rich.

Terminal valueTerminal value captures all cash flows after the forecast period. Perpetuity growth and exit multiple formulas with examples, and how to discount it right.
Gordon growth modelThe Gordon growth formula: TV = cash flow x (1 + g) / (r - g). Examples with exact results, how to pick the growth rate and the implied exit multiple check.
DCF model stepsThe six steps of a DCF: forecast unlevered free cash flow, set WACC, compute terminal value, discount it all, bridge to equity value and divide by shares.
Enterprise value to equity valueEquity value = enterprise value - debt + cash - preferred stock - minority interest. The EV to equity bridge step by step, with examples and per share value.