Investment Banking - Finance Fundamentals

Gordon Growth Model (Perpetuity Growth)

Assumes the company grows at a stable, modest rate forever beyond the forecast period. You take the final year's free cash flow, grow it slightly, and divide by (WACC − g). It's theoretically grounded but sensitive to your growth rate assumption.

Exit Multiple Method

Assumes you "sell" the company at the end of the forecast period at whatever multiple similar companies are trading at today — typically EV/EBITDA. It's market-based and easier to defend, but anchored to current market conditions.

Unlevering Beta

βL ÷ (1 + (1 - Tax Rate) × (Debt/Equity))

Re-levering Beta

βL = βU × (1 + (1 - Tax Rate) × (Debt/Equity))

Hamada Equation

βL = βU × (1 + D/E)