Calculator Inputs
Example Data Table
| Scenario | Final FCF | WACC | Growth | Exit Metric | Multiple | Forecast Years |
|---|---|---|---|---|---|---|
| Stable company | $2,500,000 | 10% | 3% | $3,200,000 EBITDA | 8.0x | 5 |
| Slow growth case | $1,800,000 | 11.5% | 2% | $2,400,000 EBITDA | 6.5x | 5 |
| Higher growth case | $4,000,000 | 9% | 4% | $5,100,000 EBITDA | 10.0x | 7 |
Formula Used
Next year free cash flow: FCF n+1 = FCF n × (1 + g)
Gordon growth terminal value: TV = FCF n+1 / (r - g)
Exit multiple terminal value: TV = Exit Metric × Exit Multiple
Present value of terminal value: PV TV = TV / (1 + r)^n
Blended terminal value: Blended TV = Gordon TV × Weight + Multiple TV × (1 - Weight)
Enterprise value: EV = PV Explicit Cash Flows + PV Blended TV
Equity value: Equity Value = EV + Excess Cash - Net Debt
Per share value: Per Share Value = Equity Value / Shares Outstanding
How to Use This Calculator
- Enter the final forecast year free cash flow.
- Add the discount rate or weighted average cost of capital.
- Enter the perpetual growth rate.
- Choose the forecast period length in years.
- Add an exit metric value and matching market multiple.
- Set the blend weight between growth and multiple methods.
- Add explicit forecast present value, debt, cash, and shares.
- Press the calculate button to view results above the form.
- Download the report as CSV or PDF for later use.
Why Terminal Value Matters
Terminal value often drives a large part of a discounted cash flow model. It represents cash value beyond the detailed forecast period. A strong estimate keeps the model practical. It also avoids guessing yearly cash flow forever. This calculator compares two common methods. The perpetual growth method assumes free cash flow grows at a steady rate. The exit multiple method values the business using a market style multiple. The blended view can reduce dependence on one single assumption.
Input Discipline
Good terminal value work needs discipline. The discount rate should be higher than the perpetual growth rate. The growth rate should be realistic and modest. It often stays near long-term inflation or economic growth. The exit multiple should match the selected base. Use EBITDA multiples for EBITDA. Use revenue multiples only when margins are meaningful or still developing. The forecast period should be long enough for cash flow to become stable.
Present Value View
Present value is equally important. A high end-year terminal value may look impressive. Yet discounting can reduce it sharply. This is why the calculator shows both end-year value and present value. It also estimates enterprise value, equity value, per-share value, and terminal value share. These outputs help you see whether the final estimate dominates the model.
Sensitivity Review
Sensitivity analysis is essential. Small changes in discount rate or growth can create large swings. The sensitivity table shows how fragile or stable the valuation may be. Use it before making a final conclusion. The chart helps compare the perpetual growth, multiple, and blended outcomes quickly.
Final Judgment
Always review the business story behind the numbers. A mature company may deserve lower growth and a steadier multiple. A risky company may need a higher discount rate. A high growth company may need a longer forecast period before terminal value begins. Treat the result as a decision aid, not a guaranteed price. Combine it with peer research, margin review, capital needs, and competitive analysis. Better inputs create better valuation insight. Test conservative and optimistic cases separately. Record every assumption. Explain why each rate, multiple, and cash flow level was chosen. Clear notes make later updates easier and reduce hidden bias in the final valuation.
FAQs
1. What is terminal value in a DCF model?
Terminal value estimates business value after the detailed forecast period. It captures long-term cash flow value without projecting every future year manually.
2. Why is terminal value important?
Terminal value can represent a large share of enterprise value. A small assumption change can strongly affect the final valuation.
3. Which method is better, growth or exit multiple?
Neither method is always better. The growth method suits stable cash flows. The exit multiple method is useful when market comparables are reliable.
4. Why must WACC exceed growth?
The Gordon growth formula divides by WACC minus growth. If growth is equal or higher, the formula becomes invalid or unrealistic.
5. What growth rate should I use?
Use a modest long-term rate. It often aligns with inflation, GDP growth, or stable industry growth expectations.
6. What is an exit multiple?
An exit multiple values the company using a market ratio. Common examples include EBITDA, EBIT, or revenue multiples.
7. What does terminal value share mean?
It shows how much of enterprise value comes from terminal value. A high share means assumptions need careful review.
8. Can I export the results?
Yes. Use the CSV button for spreadsheet work. Use the PDF button for a clean summary report.