When determining a terminal value for a cyclical company, the banker must make sure that:

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When determining a terminal value for a cyclical company, the banker must make sure that earnings are normalized. This is important because cyclical companies are prone to fluctuations in their earnings due to changes in the business cycle. By normalizing the earnings, the banker can get a better estimate of the company's long-term earning power, which is essential for determining the terminal value. Using earnings at a cyclical high or low may not accurately reflect the company's true earnings potential. The perpetuity growth method may be used to determine the terminal value, but it is not a requirement.

When Determining a Terminal Value for a Cyclical Company, the Banker