Why shouldn’t we use an exit multiple? We discussed how this is not appropriate and that it is a pricing estimate, but what’s exactly wrong with it?
Because Pricing in Intrinsic valuation makes no sense.
If there is no growth, is it an annuity?
Remember, if there is no growth, there is no reinvestment. So you just divide the number by the COC.
It should go up right?
So here’s the thing - if there is a growth rate, there is reinvestment, which means that your operating income is now decreasing!!!
By how much? And what is the formula?, that’s what will be discussed today.