REIT Discounted Cash Flow valuation model, part five, terminal value multiple method. The first evaluation approach we will use is the terminal value multiple method. This method, as the name implies, uses a multiple to derive the terminal value, the value of the company beyond the forecast period. In this case, we've taken a look at a compset and have decided that we're going to use the enterprise value to EBITDA for the forecast year one as our multiple. The compset returned a median multiple of about 18.5 so we need to make some assumption based on that multiple to apply it to our REIT's EBITDA. Based on that, I've chosen 17. Now I've chosen 17 because we're going to be applying this multiple to the EBITDA in year 10 which is the last year of our forecast. We want to be somewhat conservative and not go too far above what the median of the comps is telling us. I've chosen 17. The first thing we need to do is calculate the EBITDA for this REIT. So if we go down to row 81, for projected year one we're gonna start with the operating profit which is the EBIT, in row 57, and we're simply gonna add depreciation from row 60.

I also need to calculate a growth rate, and this is just so that I can, again, have a sanity check on my calculations and make sure that they're not running away from me.

Now, if I go back up to my terminal value calculation, take that 17 and apply it to the EBITDA in year 10.

Now I'm gonna be comparing back and forth between the multiple method and the perpetuity method. So one calculation that comes in handy is one that calculates the implied growth rate as if I had used the free cash flow method. So basically what it does is it takes the terminal value using the multiple method and it backs into a growth rate and then I can compare that growth rate to my assumption in the perpetuity method, and it helps me determine if my two methods are tracking, they should not deliver values that are very different from each other. The way I do that is I take the terminal value times the WACC. I'm gonna use my name cell minus the free cash flow from year 10, and I divide that by the terminal value plus the free cash flow from year 10.

And that tells me that based on the 17 times EBITDA multiple, I have an implied free cash flow growth rate in the terminal value period which is beyond the forecast of 2.4%. Now, we need to calculate the present value of the terminal value, and that's simply going to be the terminal value times my discount factor from year 10. I just need to make sure at this point that I get the WACC discount factor not the cost of equity discount factor which I calculated below for the stock issuances. And now the sum of my present value of my free cash flows.

And I get an implied enterprise value of 17,157,350.

One calculation that comes in handy is to determine what percentage of my enterprise value is the terminal value. Terminal values can comprise a very large portion of the enterprise value, so that is not uncommon. What this reinforces with us is that we have to take extra precaution with the terminal value since so much of the enterprise value is riding on it. I now need to get from enterprise value to equity value. Going to do that by adding the cash and then subtracting all of the other claims on the equity, the debt, the redeemable NCIs, and the NCIs. Now, as you recall above, I have an enterprise value calculation. In this case, I went from equity value to enterprise value so I can actually link to these figures. I just need to reverse them because I'm going the other way. These are simply balance sheet figures from the last fiscal balance sheet at the time of the transaction. So my cash and equivalence is gonna be equal to the opposite of this.

My debt is gonna be equal to the opposite. My redeemable NCIs as well.

And then my NCIs.

Now, I'm not going to consider the equity investments and non-core assets, because those have to be calculated or valued separately. Those are non-controlled, and as a result, they cannot be included in a traditional DCF which is a controlled valuation. To get my implied equity value, I'm going to take the enterprise value plus the sum of these, and that gives me my total equity value. To get my implied equity value per share, I simply take my equity value and I divide it by the total shares outstanding from row 27, calculate my premium or discount to the current share price. My current share price is 152.71, and I get 9.6%.