Perpetuity Growth Method (PGM)
Investment Banking Glossary
Perpetuity Growth Method (Gordon Growth) — terminal-value method: TV = (UFCF_n · (1+g))/(WACC - g), where g is the perpetuity growth rate (typically 1.5-3.0%, approximating long-run nominal GDP growth). Must satisfy g < WACC or the formula explodes. More sensitive to small input changes than the Exit Multiple Method; cross-check by computing the implied exit multiple and ensuring it is consistent with comp-set ranges.
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