class 15: the discount rate - wacc

terminal value

captures the value of the business beyond the projection period; often accounts for a significant portion (50%+) of the total dcf valuation

dcf alternatives to consider

• valuations based on customer base: example: depositing sportsbook customers are valued at 1,500 to 2,500 each

• valuations based on strategic advantage: sometimes, a company has an asset or advantage that is considerably valuable, like patents or distribution

whose wacc do you use in a transaction

use the acquiror’s wacc because they are determining what rate of return they would like to achieve with the capital being deployed

what growth rate do you use

use one that is less than the wacc so that hte terminal value is not negative