![]() The term DCF terminal value summarizes in a single number the value of the future steady-state cash flows.Finally, calculate the implied share price using the enterprise value to equity bridge.Once all of those future cash flows have been discounted that gives us the enterprise value.Compute the terminal value – assume that the company enters into some kind of steady-state – we need to calculate this terminal value and it will represent all those cash flows from year 6 or 11 onwards to infinity.Calculate the weighted average cost of capital (WACC).Forecast the free cash flows to be discounted for the first five or ten years to steady-state (i.e.The steps for undertaking DCF analysis are: The value of the future steady state cash flows can be summarized in a single number called the DCF terminal value. The steady state period typically coincides with the end of the explicit forecast of the DCF analysis. ![]() To understand the concept of DCF Terminal Value, we must know that after a period of growth, a company reaches “steady state” which is when all sources of competitive advantage are exhausted and its profitability and efficiency ratios are stabilized. This can be calculated using two formulas: the Growing Perpetuity Formula and Terminal EV Multiple Formula. arriving at a DCF valuation) involves certain steps which include the calculation of the DCF Terminal Value. The process of undertaking DCF analysis (i.e.
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