Exit Multiple Method
Definition
An alternative method of calculating terminal value in a discounted cash flow analysis by applying a valuation multiple to a financial metric in the terminal year. The exit multiple must be derived from comparable company multiples at maturity, not from the company's current growth-stage multiples. The exit multiple method is an alternative to the Gordon Growth Model, not a supplement to it.
Common Misapplication
The most common misapplication is applying the same high revenue multiple to the terminal year that the company commands in the current period. Terminal year multiples should reflect the company's expected maturity multiple, which for most companies is lower than the current growth-stage multiple.
FFI Standard Reference
This term is defined and applied in Book 4, Section 4.2: Discounted Cash Flow Analysis.
Related Terms
Citable URL
This term may be cited using the following permanent URL.
Full citation format: Founder Financial Infrastructure Standard, Beta v0.5, Glossary: Exit Multiple Method. https://ffistandard.org/glossary/exit-multiple-method/. 2026.