Terminal Value Calculator
Calculate terminal value with the Gordon Growth or Exit Multiple method, then discount it back to today and bridge enterprise value to equity value per share.
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Formula
Terminal value = Final-year FCF × (1 + perpetual growth rate) ÷ (WACC − perpetual growth rate)
Terminal value estimates the value of cash flows beyond the explicit forecast period. In a DCF, it often represents most of enterprise value, so small changes in WACC, perpetual growth, or exit multiple can move valuation materially.
Sensitivity table
Present value of terminal value in $m. Rows flex perpetual growth and columns flex WACC.
| Growth / WACC | 9% | 10% | 11% |
|---|---|---|---|
| 2% | $947.0m | $791.7m | $672.6m |
| 3% | $1,115.7m | $913.6m | $764.1m |
| 4% | $1,351.9m | $1,076.3m | $881.7m |
When to use Gordon Growth
Use Gordon Growth when the business is expected to mature into a stable long-term cash flow profile. It is best for DCF models with defensible FCF and long-run growth assumptions.
When to use Exit Multiple
Use Exit Multiple when comparable company or transaction multiples are a better proxy for market value. It is common in LBOs, private equity cases, and market-based DCFs.
Common modeling mistake
Do not let perpetual growth exceed or equal WACC. The formula breaks because it implies cash flows grow forever as fast as, or faster than, the discount rate.
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Use these next-step tools and Excel templates to turn the quick calculation into a more complete finance workflow.