Glossary
Terminal value
The value of a company’s cash flows beyond the explicit forecast period of a DCF.
It is calculated either with a perpetual growth rate, the Gordon growth model, or by applying an exit multiple to the final year’s cash flow or earnings.
Terminal value often makes up more than half of a DCF’s total, so its assumptions deserve as much scrutiny as the forecast itself. A perpetual growth rate above long-run nominal GDP growth is hard to defend.
In Hebrides
The Valuation Suite shows the terminal value assumption with the rest of the DCF build.
Valuation Suite