We'll prove the drivers of multiples through some basic high school math.
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Hey team, great course as always.
Just played around with the numbers a little and found that the multiple is highest when WACC~G (which mathematically makes sense) but intuitively it seems that the multiple should be highest when G>>WACC.
Also, when G>WACC and both G>0 and WACC>0 the multiple is negative, which doesn’t seem to make sense.
Any explanation here would be greatly appreciated!
Thanks
Never mind – just realized that G>WACC implies growth rate >economy, so WACC~G represents the highest feasible value of G.