Series 79: Step Three: Calculating The Value Of The Company At The End Of The Period (Terminal Value)

Step Three: Calculating the Value of the Company at the End of the Period (Terminal Value)

Since it is neither wise nor feasible to estimate cash flow to infinity, an amount that represents perpetual value must be assigned to the company. This amount is called the terminal, perpetuity, or horizon value. There are different approaches to calculating this value, but it may help to think of the terminal value as a lump sum representing the then-present value of all future cash flows into