Courses / Valuation Multiples / Math Proof of the Drivers Behind FCF Multiples

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Math Proof of the Drivers Behind FCF Multiples (12:08)

We'll prove the drivers of multiples through some basic high school math.

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Y Ogino
4 days ago

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

Y
Y Ogino
4 days ago
Reply to  Y Ogino

Never mind – just realized that G>WACC implies growth rate >economy, so WACC~G represents the highest feasible value of G.

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