Why show a range of exit multiples rather than a single number?

Why show a range of exit multiples rather than a single number?

• A. To illustrate how Terminal Value changes with different multiples
• B. To save time
• C. To comply with a rule
• D. To mislead investors

Answer: (A)

The main idea here is that Terminal Value is highly sensitive to the exit multiple, so a range is shown to capture uncertainty. In valuation, the Terminal Value often comes from multiplying a final-year metric (like EBITDA) by an exit multiple. Since market conditions and buyer expectations can swing the multiple, presenting a range communicates how much value could change if the multiple is higher or lower. This also helps illustrate risk and potential upside or downside without pretending there’s a single precise number. The other choices don’t fit because it isn’t about saving time, following a rule, or trying to mislead investors. It’s about reflecting real-world variability in what the company could fetch at exit.

The main idea here is that Terminal Value is highly sensitive to the exit multiple, so a range is shown to capture uncertainty. In valuation, the Terminal Value often comes from multiplying a final-year metric (like EBITDA) by an exit multiple. Since market conditions and buyer expectations can swing the multiple, presenting a range communicates how much value could change if the multiple is higher or lower. This also helps illustrate risk and potential upside or downside without pretending there’s a single precise number.

The other choices don’t fit because it isn’t about saving time, following a rule, or trying to mislead investors. It’s about reflecting real-world variability in what the company could fetch at exit.