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Terminal Value using Perpetuity Method Formula

GoTerminal Value using Exit Multiple Method Formula

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Terminal Value represents the value of a project or investment at the end of a specific period, typically when explicit cash flow projections end. Check FAQs

TV = \frac{FCF}{DR - g}

TV - Terminal Value?FCF - Free Cash Flow?DR - Discount Rate?g - Growth Rate?

Terminal Value using Perpetuity Method Example

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Here is how the Terminal Value using Perpetuity Method equation looks like with Values.

Here is how the Terminal Value using Perpetuity Method equation looks like with Units.

Here is how the Terminal Value using Perpetuity Method equation looks like.

10169.4915 = \frac{120000}{12 - 0.2}

10169.4915 = \frac{120000}{12 - 0.2}

10169.4915 = \frac{120000}{12 - 0.2}

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Terminal Value using Perpetuity Method Solution

Follow our step by step solution on how to calculate Terminal Value using Perpetuity Method?

FIRST Step Consider the formula

TV = \frac{FCF}{DR - g}

Next Step Substitute values of Variables

∴

TV = \frac{120000}{12 - 0.2}

Next Step Prepare to Evaluate

∴

TV = \frac{120000}{12 - 0.2}

Next Step Evaluate

∴

TV = 10169.4915254237

LAST Step Rounding Answer

∴

TV = 10169.4915

Terminal Value using Perpetuity Method Formula Elements

Variables

Terminal Value

Terminal Value represents the value of a project or investment at the end of a specific period, typically when explicit cash flow projections end.

Symbol: TV

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Terminal Value

Free Cash Flow

Free Cash Flow (FCF) is the amount of cash that a company has left over after it has paid all of its expenses, including net capital expenditures.

Symbol: FCF

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Free Cash Flow

Discount Rate

Discount Rate is the interest rate charged to commercial banks and other depository institutions for loans received from the Federal Reserve Bank’s discount window.

Symbol: DR

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Discount Rate

Growth Rate

Growth Rates refer to the percentage change of a specific variable within a specific time period, given a certain context.

Symbol: g

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Growth Rate

Other Formulas to find Terminal Value

Go Terminal Value using Exit Multiple Method

TV = EBITDA n+1 \cdot EM

Other formulas in Capital Budgeting category

Go Payback Period

PBP = \frac{Initial Invt}{C f}

Go Cost of Retained Earnings

C RE = (\frac{D}{P c}) + g

Go Cost of Debt

R d = Int.E \cdot (1 - T r)

Go After-Tax Cost of Debt

ATCD = (R f + CS P) \cdot (1 - T r)

How to Evaluate Terminal Value using Perpetuity Method?

Terminal Value using Perpetuity Method evaluator uses Terminal Value = Free Cash Flow/(Discount Rate-Growth Rate) to evaluate the Terminal Value, The Terminal Value using Perpetuity Method formula is defined as the present value of all future cash flows of a business or an investment beyond a certain point in the future. Terminal Value is denoted by TV symbol.

How to evaluate Terminal Value using Perpetuity Method using this online evaluator? To use this online evaluator for Terminal Value using Perpetuity Method, enter Free Cash Flow (FCF), Discount Rate (DR) & Growth Rate (g) and hit the calculate button.

FAQs on Terminal Value using Perpetuity Method

What is the formula to find Terminal Value using Perpetuity Method?

The formula of Terminal Value using Perpetuity Method is expressed as Terminal Value = Free Cash Flow/(Discount Rate-Growth Rate). Here is an example- 10169.49 = 120000/(12-0.2).

How to calculate Terminal Value using Perpetuity Method?

With Free Cash Flow (FCF), Discount Rate (DR) & Growth Rate (g) we can find Terminal Value using Perpetuity Method using the formula - Terminal Value = Free Cash Flow/(Discount Rate-Growth Rate).

What are the other ways to Calculate Terminal Value?

Here are the different ways to Calculate Terminal Value-

Terminal Value=EBITDA at Last Period*Exit Multiple

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Terminal Value using Perpetuity Method Formula

​GoTerminal Value using Exit Multiple Method Formula

Terminal Value using Perpetuity Method Example

Terminal Value using Perpetuity Method Solution

Terminal Value using Perpetuity Method Formula Elements

Other Formulas to find Terminal Value

Other formulas in Capital Budgeting category

How to Evaluate Terminal Value using Perpetuity Method?

FAQs on Terminal Value using Perpetuity Method

Variable Name

GoTerminal Value using Exit Multiple Method Formula