Discover the concept of Terminal Value and explore the two primary methods used to calculate it—the Perpetual Growth (Gordon Growth Model) and Exit Multiple method.
Terminal value (TV) is the value of an asset, business, or project beyond the forecasted period when future cash flows can be estimated
Terminal value assumes a business will grow at a set growth rate forever after the forecast period
Terminal value often comprises a large percentage of the total assessed value
There are two commonly used methods to calculate terminal value—perpetual growth (Gordon Growth Model) and exit multiple.
Let’s calculate Terminal Value in our example”
H23 = H22*(1+C5)/(C4-C5)
How to Learn Financial Modeling
Master financial modeling with hands-on training. Financial modeling is a technique for predicting the financial performance of a business or other type of institution over time using real-world data.
