Terminal value captures the value of all cash flows beyond your explicit forecast period. It typically drives 60–80% of DCF value — getting it right is critical.
Use variable names from the panel above (e.g. FV, r, n) — or type numbers directly: 10000 / (1 + 0.08)^10
FCFF_last
Free cash flow in the final explicit forecast year
FCFF_last = 200
g% as decimal
Stable perpetual growth rate (must be < WACC)
g = 0.03
WACC% as decimal
Weighted average cost of capital
WACC = 0.09
💡 You can also enter values directly in the formula: 10000 / (1 + 0.08)^10
Advertisement
⬇ Export Calculation
Exports a plain .txt file with your expression, formula, all variable values, result, and educational notes — ready to paste into any report, Word doc, Notion, or Google Docs.
The exported file includes the formula in standard mathematical notation — you can paste it directly into Excel, Google Sheets, or back into FinanceSheep.
📖
Learn: What Is the Business Worth Beyond Year 10?
Terminal Value · Educational Guide
The Core Idea
You can't forecast a business forever in detail. So at year 10 (or year 5 or year 15), you assume the company enters a "stable phase" and keeps growing at a modest, constant rate forever. That's terminal value.
How It Works
Terminal Value = FCFF_next_year / (WACC − g). This is the Gordon Growth Model. The key constraint: g must be ≤ long-run economic growth (~2–3%). If g exceeds GDP growth, the company eventually becomes larger than the whole economy — impossible.
💡
Real-World Example: Final year FCFF = $200M. Stable growth g = 3%, WACC = 9%: TV = 200 × 1.03 / (0.09 − 0.03) = 206 / 0.06 = $3,433M. Now discount back: if this is Year 10, PV = 3,433 / (1.09)^10 = $1,450M.