An investment banker uses the exit multiple method to calculate terminal value. If the Year 5 projected EBITDA is $150 million and the selected exit EV/EBITDA multiple is 9.0x, what is the terminal value? Additionally, which of the following best describes when this method is preferred over the perpetuity growth method?

Why A — $1,350 million; preferred when comparable transaction multiples provide a market-based reference point

Terminal value using the exit multiple method = Year 5 EBITDA x Exit Multiple = $150M x 9.0x = $1,350M. The exit multiple method is preferred when there are reliable comparable company or transaction multiples available, as it grounds the terminal value in observable market data rather than theoretical perpetuity growth assumptions. Many practitioners use both methods as a cross-check, with the exit multiple method often considered more intuitive for M&A contexts.