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The Relevance of Historical and Forecast Periods in a Business Valuation

Equilest

2018–2022) Year Revenue ($M) EBITDA Margin CapEx ($M) Working Capital ($M) 2018 8.0 Assumptions Forecast Period: 2023–2027 WACC: 10% Terminal Growth Rate: 3% Final Year FCFF (2027): $1.8M Flat Terminal Growth Assumptions : Even modest changes from 2% to 3% drastically affect terminal value. ?

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Issues faced when valuing a declining company

Andrew Stolz

This is a Valuation Master Class student essay by Lim Lee Bin from June 16, 2018. When used to value a declining company, analysts will face special challenges as the characteristics of a declining company will cause some of the valuation model’s assumptions to break down. Issues faced when using a relative valuation method.