Rules Of Thumbs

Posts Tagged ‘Discount Rate’

Steady Growth Business Valuation Rule of Thumb

Sunday, November 4th, 2007

For a company that is growing at a steady-state rate, 10x EBITDA (earnings before interest, taxes, depreciation, and amortization, see rule of thumb: Cash Flow). This is essentially providing you with a proxy for a financial valuation theory known as the Dividend Growth Model. This theory states the value of a company is given by dividing its annual cash flow by the appropriate discount rate less the company s growth rate. Therefore, the 10x EBITDA rule of thumb comes from dividing the current years estimated cash flow by a 10% (net of growth) discount rate.

Tags: 10x, Cash Flow, Discount Rate, EBITDA, Growth, Rule of Thumb, Valuation
Posted in Business, Valuation | No Comments »

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Posts Tagged ‘Discount Rate’

Steady Growth Business Valuation Rule of Thumb

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