The terminal value (TV) represents the projected worth of a business beyond a specific forecasting period. There are two main methods to estimate terminal value: perpetual growth method and exit multiple method.Perpetual growth method assumes that the company's cash flows will grow at a steady rate indefinitely into the future. The formula is as follows:FCF represents the free cash flow for the last year of your projected period. This approach is commonly used for businesses or industries expected to grow at a constant rate infinitely. This is often suitable for stable, mature companies.
Learn Terminal Value - Perpetual Growth with interactive examples and practice exercises in our Valuation module.
This interactive learning module helps you understand Terminal Value - Perpetual Growth through hands-on practice and real-world examples.