One question here about the terminal growth assumption. I'm with you that the RFR and the terminal should be correlated, but I find that making the terminal equivalent to the RFR cancels out the country risk premium built into the RFR. You then have to increase the ERP to adjust for it. Instead I've just been making the terminal equivalent to inflation, which seems to work in almost every country except India and South Korea. Also inflation also makes sense because a mature company in theory has reached mature market share in a max volume market (ie. incremental gdp doesn't mean more coca cola demand), therefore would expect growth to mimic inflation. Wondering if this line of thinking makes sense to you? Seems like inflation terminal works in most markets except India, which definitely uses nominal gdp growth terminal for everything.
Your finance knowledge is really remarkable.
One question here about the terminal growth assumption. I'm with you that the RFR and the terminal should be correlated, but I find that making the terminal equivalent to the RFR cancels out the country risk premium built into the RFR. You then have to increase the ERP to adjust for it. Instead I've just been making the terminal equivalent to inflation, which seems to work in almost every country except India and South Korea. Also inflation also makes sense because a mature company in theory has reached mature market share in a max volume market (ie. incremental gdp doesn't mean more coca cola demand), therefore would expect growth to mimic inflation. Wondering if this line of thinking makes sense to you? Seems like inflation terminal works in most markets except India, which definitely uses nominal gdp growth terminal for everything.