TerminalValue
Computes the terminal value at the end of a forecast's explicit period, by either the Gordon Growth (perpetuity growth) model or an exit multiple. Under Gordon Growth the final cash flow is grown one period and capitalized at DiscountRate − GrowthRate, and the node reports an error rather than a nonsense number if the growth rate meets or exceeds the discount rate. The result is an undiscounted year-N value; feed it into DiscountCashFlows, which discounts it along with the final period.
Inputs
| Input | Accepts | Required |
|---|---|---|
FinalCashFlow | Value (a single number) | Yes |
DiscountRate | Value (a single number) | Yes |
GrowthRate | Value (a single number) | Yes |
ExitMultiple | Value (a single number) | Yes |
Outputs
| Output | Produces |
|---|---|
Result | Value (a single number) |
Settings
Typed in on the node or set by the assistant, not wired.
| Setting | Default | Notes |
|---|---|---|
Method | GordonGrowth | GordonGrowth (the default) computes FinalCashFlow × (1 + GrowthRate) / (DiscountRate − GrowthRate); ExitMultiple computes FinalCashFlow × ExitMultiple. Only the inputs the chosen method uses matter. |
GrowthRate | 0.025 | Perpetuity growth rate for Gordon Growth, as a decimal. Must be below the discount rate. Default 0.025. |
ExitMultiple | 10 | The multiple applied to the final cash flow under the ExitMultiple method. Default 10. |
Example
The last year of a 5-year forecast shows $6.8M of free cash flow, the discount rate from WACC is 10%, and long-run growth is 2.5%. Gordon Growth gives 6.8 × 1.025 / (0.10 − 0.025), about $92.9M. Switching Method to ExitMultiple with a multiple of 12 gives $81.6M instead; running both is a quick sanity check on the perpetuity assumption.
Tips
Wire the same WACC output into both this node's DiscountRate and DiscountCashFlows so the two never drift apart. Terminal value usually dominates a DCF; put it on a KPICard next to TotalPV to keep its share of the answer visible.