Terminal Value Calculator
A DCF can't forecast forever, so the terminal value captures everything after the last forecast year. Compare the two standard methods: grow the final cash flow at a steady rate forever, or apply an exit multiple to EBITDA.
Inputs
Results
- Terminal value (growth method)
- $13,666,667
- Present value of it
- $8,485,925
- Terminal value (exit multiple)
- $12,800,000
- Present value of it
- $7,947,793
- Multiple implied by the growth method
- 8.54x
How it's calculated
| Result | Formula |
|---|---|
| Terminal value (growth method) | =FCF × (1 + g) / (WACC − g) |
| Present value of it | =TV / (1 + WACC)^year |
| Terminal value (exit multiple) | =EBITDA × exit multiple |
| Present value of it | =TV / (1 + WACC)^year |
| Multiple implied by the growth method | =Growth-method TV / EBITDA |
The terminal value is often 60 to 80% of a DCF's total value, so small changes to the growth rate or multiple move the answer a lot. The growth rate should stay below long-run GDP growth.
Check the two methods against each other: if the growth method implies a multiple far above where comparable companies trade, the growth rate is probably too high.
Build it yourself
Build the whole DCF, from the forecast to WACC and the terminal value, in the free Academy course, graded as you go.
Try the DCF courseQuestions
How do you calculate terminal value?
Perpetuity growth: TV = final FCF × (1 + g) ÷ (WACC − g). Exit multiple: TV = final EBITDA × an EV/EBITDA multiple. Then discount it back by the final forecast year.
What growth rate should I use?
Usually 2 to 3%, around long-run inflation or GDP growth. It must be below the discount rate, or the formula breaks.
Why discount the terminal value?
It's a value as of the final forecast year, so it has to be brought back to today like every other cash flow: divide by (1 + WACC) raised to that year.
Which method is better?
Bankers usually show both. The exit multiple ties to the market; the growth method ties to fundamentals. Each is a sanity check on the other.