Terminal value typically accounts for the majority of a DCF's total value, which is why assumptions about perpetual growth and terminal margins matter enormously.
The two common approaches are the Gordon growth model (perpetual growth rate) and exit multiple (applying a market multiple in the terminal year).
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Related terms
Discounted cash flow (DCF)
A valuation method that discounts future cash flows back to their present value.
WACC (weighted-average cost of capital)
A blended cost of a company's debt and equity financing, weighted by capital structure.
Discounted cash flow (DCF)
A valuation method that discounts a company's future cash flows to present value.