Terminal Value Calculator

Enter Calculation

Method Perpetuity Growth Exit Multiple

Final-Year Free Cash Flow

Perpetual Growth Rate g (%)

WACC / Discount Rate (%)

Final-Year EBITDA

Exit Multiple (x)

Results

Terminal Value

1,576.92

undiscounted, at end of forecast period

Method	Perpetuity Growth
Next-Year Cash Flow (FCF × (1+g))	102.5

What Is Terminal Value?

Terminal value (TV) represents the value of a business or investment beyond an explicit forecast horizon, when cash flows are assumed to grow at a stable, perpetual rate. In a discounted cash flow (DCF) model the terminal value often accounts for 60–80% of total enterprise value, so getting it right matters enormously. This calculator supports the two industry-standard methods: the perpetuity growth (Gordon Growth) model and the exit multiple method.

Terminal value captures the bulk of a company's value beyond the explicit forecast period.

How to Use This Calculator

Choose a method. For Perpetuity Growth, enter your final forecast-year free cash flow (FCF), the long-term growth rate \(g\), and your weighted average cost of capital (WACC). For the Exit Multiple method, enter final-year EBITDA and the multiple you expect a buyer to pay (e.g. an EV/EBITDA of 8×). The result is the undiscounted terminal value as of the end of the forecast period — remember to discount it back to today in your DCF.

The Formula Explained

The perpetuity growth formula is $$\text{TV} = \frac{\text{FCF}\left(1 + \text{g}\right)}{\text{WACC} - \text{g}}$$ It treats the post-forecast cash flows as a perpetuity growing forever at rate \(g\). The denominator \(\text{WACC} - \text{g}\) must be positive, so \(g\) must stay below your discount rate — typically near long-run GDP or inflation (2–3%). The exit multiple formula is simply $$\text{TV} = \text{EBITDA} \times \text{Exit Multiple}$$ anchoring value to current market pricing of comparable companies.

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Two common approaches: the perpetuity growth (Gordon) model and the exit multiple method.

Worked Example

Suppose final-year FCF is 100, \(g\) is 2.5%, and WACC is 9%. Then $$\text{TV} = \frac{100 \times (1.025)}{0.09 - 0.025} = \frac{102.5}{0.065} = \mathbf{1{,}576.92}$$ Using the exit multiple method with EBITDA of 150 and an 8× multiple gives $$\text{TV} = 150 \times 8 = \mathbf{1{,}200}$$

FAQ

Which method should I use? Many analysts compute both and triangulate. Perpetuity growth is theory-driven; exit multiple is market-driven.

What if WACC equals g? The perpetuity formula breaks down (division by zero) — lower \(g\) below WACC for a sensible result.

Is this value discounted? No. The output sits at the end of the forecast period; divide by \((1+\text{WACC})^n\) to bring it to present value.