What is Terminal Value ?

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 / SoftwareDescriptionLink
CFI – Corporate Finance InstituteTraining, detailed explanations & templatesCFI Website
FinboxDetailed company financials & modelsFinbox Website
TradingViewBasic company financials & chartsTradingView Financials
SharePadCompany financials, news, filters and portfolio managementSharePad Signup Page

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