medium · Investment Banking valuation-core

In a DCF terminal value calculation using the Perpetuity Growth Method, what happens if the assumed growth rate (g) exceeds the WACC (r)?

1. The resulting terminal value is minimized in that case
2. The formula produces a negative or infinite value that is not usable
3. The analyst should instead switch over to the Exit Multiple Method
4. The implied Enterprise Value increases without bound exponentially

Sign up free to see the explanation and track your rank →