What is Terminal Value? Terminal Value is the estimated present value of a company beyond the forecasting period. It is used in valuation modelling, specifically discounted cash flow modelling (DCF).
The purpose of the terminal value is to put a value on all future cash flows beyond the forecasted period. It is impossible to forecast a company until its end of life as we have no idea if or when the company will stop producing cash flow. Additionally, the longer we attempt to forecast future cash flows, the less accurate the forecast is likely to be.
The terminal value can also be referred to as the continuing value or the horizon value.
There are two common ways of calculating terminal value in a DCF model:
EBITDA Exit Multiple
Perpetual Growth Rate
Further Details & Company Data
For more detailed information, including training, templates and company figures, visit one of the below sites or software providers:
| Site / Software | Description | Link |
|---|---|---|
| CFI – Corporate Finance Institute | Training, detailed explanations & templates | CFI Website |
| Finbox | Detailed company financials & models | Finbox Website |
| TradingView | Basic company financials & charts | TradingView Financials |
| SharePad | Company financials, news, filters and portfolio management | SharePad Signup Page |
Subscribe for future posts
We do not give or sell your email address to anyone else, so you will not receive spam mail by subscribing to Bull Headed Bear. We hate spam mail as much as you!