A firm has an EBITDA forecast of $150,000 in 5 years.If its EBITDA multiple is 9 and the discount rate is 5%,what is the PV of the firm's terminal value?
A)$1.06 million
B)$1.35 million
C)$1.15 million
D)$150,000
E)$117,530

Question

Quizplus · Accepted Answer

The terminal value is calculated as EBITDA forecast * EBITDA multiple = $150,000 * 9 = $1,350,000. To find the present value (PV), we discount this amount back 5 years using the formula PV = FV / (1 + r)^n, where FV is the future value ($1,350,000), r is the discount rate (0.05), and n is the number of periods (5 years). Thus, PV = $1,350,000 / (1 + 0.05)^5 = $1,350,000 / 1.27628 = approximately $1.06 million.

A Firm Has an EBITDA Forecast of $150,000 in 5