Supporting our free institutional financial tools. Your audit report will unlock automatically.
Terminal Value Calculator Formula Breakdown
Free Cash Flow in the final year of the explicit projection window (Year 5).
Perpetual long-term growth rate (typically 2.0% to 3.0%, tied to long-term GDP growth).
Weighted Average Cost of Capital hurdle rate.
Earnings Before Interest, Taxes, Depreciation, and Amortization in Year 5.
The terminal EV/EBITDA multiple based on historical industry averages (typically 8x - 16x).
How to Calculate Terminal Value Step-by-Step
Input Year 5 projected Free Cash Flow and EBITDA.
Calculate Gordon Growth Terminal Value by compounding Year 5 cash flow at perpetual rate g and dividing by (WACC - g).
Calculate Exit Multiple Terminal Value by multiplying Year 5 EBITDA by the target industry exit multiple.
Discount both terminal values back to Present Value (PV) using WACC.
Divide discounted PV by shares outstanding to determine the terminal value contribution per share.
How to Interpret the Result
Frequently Asked Questions
What is Terminal Value in financial modeling?
Terminal Value (TV) represents the total estimated present value of all a company's cash flows beyond the explicit multi-year forecast horizon into perpetuity.
Gordon Growth vs Exit Multiple: which is better?
Institutional analysts use both. Gordon Growth reflects long-term economic expansion, while the Exit Multiple method reflects realistic acquisition and transaction multiples in corporate M&A.
What should the perpetual growth rate be?
A conservative perpetual growth rate should never exceed the long-term GDP growth rate of the host economy, generally between 2% and 3%.
Other Specialized Financial Tools
Complement your research with our suite of institutional stock analysis calculators.
Reverse DCF Calculator
→Calculate the exact growth rate the market expects from any stock
Magic Formula Stock Screener
→Joel Greenblatt's proven strategy combining High Return on Capital & High Earnings Yield
Piotroski F-Score Calculator
→9-Point financial health audit to identify value gems and weed out value traps
Altman Z-Score Calculator
→Predict corporate bankruptcy and credit distress with 82%+ historical accuracy
Margin of Safety Calculator
→Warren Buffett's #1 investing principle: calculate target buy prices with strict discounts
Dividend Reinvestment (DRIP) Calculator
→Compound your wealth with reinvested dividends, monthly contributions, and yield on cost
Debt Service Coverage Ratio (DSCR) Calculator
→Evaluate corporate debt solvency, loan coverage buffers, and debt repayment capability
Interest Coverage Ratio Calculator
→Times Interest Earned (TIE): Measure corporate credit solvency and bond default risk
CAPM & Cost of Equity Calculator
→Calculate expected equity returns, investor hurdle rates, and cost of equity via Beta
EV/EBITDA Valuation Multiples Calculator
→Capital-structure-neutral enterprise valuation and implied share price modeling
DuPont 5-Step ROE Analysis Calculator
→Deconstruct Return on Equity into Operating Margin, Asset Turnover, Leverage, and Taxes
Rule of 72 & Compound Doubling Calculator
→Calculate investment doubling horizons, quadrupling timelines, and compounding milestones
Free Cash Flow Yield Calculator
→Spot undervalued cash cows: Compare FCF Yield against 10-Yr Treasuries & Dividends
ROIC vs WACC Economic Moat Calculator
→Quantify economic value creation: Test whether a company earns returns above its cost of capital
PEG Ratio (Price/Earnings-to-Growth) Calculator
→Peter Lynch's classic metric: Screen for fast growers selling at reasonable valuations
Compound Annual Growth Rate (CAGR) Calculator
→Calculate historical annualized growth rates and multi-year projection compounding
Current & Quick Ratio Liquidity Auditor
→Audit 90-day balance sheet working capital and immediate cash solvency buffers
Debt-to-Equity (D/E) Leverage Calculator
→Audit capital structure leverage risk, balance sheet debt burden, and financial gearing
Earnings Quality & Accrual Screener
→Detect aggressive accounting: Richard Sloan's Balance Sheet Accrual ratio to spot earnings manipulation
Dividend Payout & Safety Auditor
→Audit dividend sustainability: Test Free Cash Flow coverage to forecast dividend cuts
Looking for Intrinsic Fair Value Models?
Explore our 22 automated valuation models with live SEC cash flows.