Terminal Value - Meaning, Formula, Example, Calculation in Excel

Описание: In this video on Terminal Value, we are going to learn this topic in detail including its formula, examples and calculation in Excel.

𝐖𝐡𝐚𝐭 𝐢𝐬 𝐓𝐞𝐫𝐦𝐢𝐧𝐚𝐥 𝐯𝐚𝐥𝐮𝐞?
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Terminal value is the value of a Firm’s expected FCF (Free Cash Flow) beyond the period of explicit projected financial model.

𝐓𝐞𝐫𝐦𝐢𝐧𝐚𝐥 𝐕𝐚𝐥𝐮𝐞 𝐅𝐨𝐫𝐦𝐮𝐥𝐚
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Below is the formula for Terminal value.

𝐓𝐞𝐫𝐦𝐢𝐧𝐚𝐥 𝐕𝐚𝐥𝐮𝐞 𝐅𝐨𝐫𝐦𝐮𝐥𝐚 = (𝐅𝐂𝐅𝐧 𝐱 (𝟏 + 𝐠)) / (𝐖𝐀𝐂𝐂 – 𝐠)

Here,

FCF = Free Cash Flow
g = perpetual growth rate of Free Cash Flow
WACC = Weighted Average Cost of Capital

𝟑 𝐓𝐲𝐩𝐞𝐬 𝐨𝐟 𝐓𝐞𝐫𝐦𝐢𝐧𝐚𝐥 𝐕𝐚𝐥𝐮𝐞 𝐅𝐨𝐫𝐦𝐮𝐥𝐚𝐬
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𝟭. 𝗣𝗲𝗿𝗽𝗲𝘁𝘂𝗶𝘁𝘆 𝗚𝗿𝗼𝘄𝘁𝗵 𝗺𝗼𝗱𝗲𝗹: This method is the preferred formula to calculate Terminal Value of the firm.

𝗧𝗲𝗿𝗺𝗶𝗻𝗮𝗹 𝗩𝗮𝗹𝘂𝗲 = 𝗙𝗖𝗙𝗙_𝟲 / (𝗪𝗔𝗖𝗖 - 𝗚𝗿𝗼𝘄𝘁𝗵 𝗥𝗮𝘁𝗲)

𝟮. 𝗡𝗼 𝗚𝗿𝗼𝘄𝘁𝗵 𝗣𝗲𝗿𝗽𝗲𝘁𝘂𝗶𝘁𝘆 𝗠𝗼𝗱𝗲𝗹: This formula assumes that the growth rate is zero!

𝗧𝗲𝗿𝗺𝗶𝗻𝗮𝗹 𝗩𝗮𝗹𝘂𝗲 = 𝗙𝗖𝗙𝗙_𝟲 / 𝗪𝗔𝗖𝗖

𝟯. 𝗘𝘅𝗶𝘁 𝗠𝘂𝗹𝘁𝗶𝗽𝗹𝗲 𝗠𝗲𝘁𝗵𝗼𝗱: This formula uses the underlying assumption that market multiple basis is a fair approach to value a Businesses.

𝗧𝗲𝗿𝗺𝗶𝗻𝗮𝗹 𝗩𝗮𝗹𝘂𝗲 = 𝗙𝗶𝗻𝗮𝗻𝗰𝗶𝗮𝗹 𝗠𝗲𝘁𝗿𝗶𝗰 𝘅 𝗧𝗿𝗮𝗱𝗶𝗻𝗴 𝗠𝘂𝗹𝘁𝗶𝗽𝗹𝗲

To know more about Terminal Value, you can go to this 𝐥𝐢𝐧𝐤 𝐡𝐞𝐫𝐞:- https://www.wallstreetmojo.com/Termin...

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