medium · Investment Banking valuation-core
In a DCF, if Capex significantly exceeds Depreciation and Amortization (D&A) in the terminal year, what is the most likely error in the model?
- The WACC is too low, overvaluing the terminal year flows.
- The company has not reached a 'steady state'.
- The tax rate used for NOPAT is incorrect.
- The terminal growth rate is too high.
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