The Exit Value Calculator is a financial valuation tool that helps estimate the value of a business at the end of a forecast period, typically during mergers, acquisitions, or investment analysis. It is used in discounted cash flow (DCF) models to assess the terminal or residual value of a company, assuming either perpetual growth or a valuation multiple based on market comparables.
This calculator is essential for financial analysts, investors, and business owners looking to understand how much a company might be worth at the time of exit. It supports strategic decision-making, deal structuring, and financial reporting by quantifying long-term business value based on future cash flows or market metrics.
Formula of Exit Value Calculator
There are two widely accepted methods to calculate exit value:
1. Perpetual Growth Method (Gordon Growth Model)
Exit Value = (FCF_last year of forecast × (1 + g)) / (WACC − g)
Where:
- FCF_last year of forecast = Free cash flow in the final forecast year
- g = Perpetual growth rate (as a decimal)
- WACC = Weighted Average Cost of Capital (as a decimal)
This method assumes the business will grow forever at a stable rate.
2. Exit Multiple Method
Exit Value = Financial Metric_last year of forecast × Exit Multiple
Where:
- Financial Metric_last year of forecast = EBITDA, EBIT, Revenue, Net Income, or SDE in the final forecast year
- Exit Multiple = A market-derived multiplier (e.g., 8× EBITDA)
This method reflects market sentiment by applying a valuation multiple based on similar companies.
Both methods provide the terminal value which, when discounted to the present, gives a comprehensive enterprise valuation.
Common Exit Value Reference Table
Here’s a table with commonly searched scenarios using both the Gordon Growth and Exit Multiple approaches. It serves as a quick reference for analysts and entrepreneurs.
| FCF (Final Year) | g (%) | WACC (%) | Exit Value (Gordon) | EBITDA (Final Year) | Exit Multiple | Exit Value (Multiple) |
|---|---|---|---|---|---|---|
| 10,000,000 | 2.0 | 10.0 | 127,500,000 | 12,000,000 | 8× | 96,000,000 |
| 8,000,000 | 3.0 | 9.0 | 114,285,714 | 9,000,000 | 7.5× | 67,500,000 |
| 5,000,000 | 2.5 | 8.5 | 71,428,571 | 6,000,000 | 9× | 54,000,000 |
| 12,000,000 | 1.5 | 9.5 | 150,315,789 | 14,000,000 | 7× | 98,000,000 |
This table helps quickly visualize how exit values shift with changes in cash flow, growth rates, and market multiples.
Example of Exit Value Calculator
Let’s calculate the exit value of a startup using both methods.
Perpetual Growth Method:
- FCF in year 5 = $6,000,000
- g = 3% or 0.03
- WACC = 9% or 0.09
Exit Value = (6,000,000 × 1.03) / (0.09 − 0.03) = 6,180,000 / 0.06 = $103,000,000
Exit Multiple Method:
- EBITDA in year 5 = $7,500,000
- Exit Multiple = 9×
Exit Value = 7,500,000 × 9 = $67,500,000
Both values can then be discounted to present value and included in a DCF analysis.
Most Common FAQs
It belongs to the corporate finance and business valuation calculators category. It is mainly used for forecasting investment returns and calculating business worth during exit planning.
It depends on the context. Use the perpetual growth method for long-term cash-flow focused companies. Use the exit multiple method when market comparables are reliable and widely available.
Yes, especially for growth-stage startups with positive cash flow projections. It helps estimate future worth based on earnings potential and investor expectations.