Terminal Value Calculator

Calculate the terminal value of a DCF valuation using the Gordon growth (perpetuity) method, then see its present value and sensitivity to your assumptions.

DCF Inputs

Cash Flow Input Year

Terminal value is at year N; present value is at time0. End-year terminal timing is used.

Final Year Cash Flow

Use signed cash flow for the selected year. Growth applies once for CF_N and is not applied again for CF_N+1.

Perpetual Growth Rate (g)

Use a sustainable perpetual growth rate on a basis consistent with the discount rate.

Discount Rate (r)

Usually the company's WACC. Must be greater than the growth rate.

Discount Periods (n)

Number of years from today to the end of the explicit forecast period.

Terminal Value Result

Terminal Value

Enter your DCF inputs to calculate terminal value.

Present value at time 0

TV_N = CF_N × (1 + g) / (r - g) | -

Next-Year Cash Flow

r−g spread (percentage points)

Discount Factor

Discount Periods

Present Value of Terminal Value

How much the terminal value is worth today, after discounting it back to the present.

Present Value of Terminal Value

Calculate terminal value on the first tab to see its present value.

Present Value Breakdown

Calculate terminal value to see the present value breakdown.

Sensitivity Matrix - Terminal Value by Growth Rate x Discount Rate

Inspect exact nearby assumptions without changing your inputs. Choose terminal or present values; unavailable cells never represent zero.

Sensitivity value basisSensitivity view

Calculate terminal value on the Terminal Value tab to populate the sensitivity matrix.

Exit-multiple comparison

Use an explicitly entered enterprise-value multiple matching the metric and its named period. This is a relative-valuation cross-check, not a market quote or a recommended price.

Include an exit-multiple cross-check

Enterprise-value metricMetric periodSigned metric amountMatching EV multiple

No metric is copied from free cash flow. A forward multiple must explicitly quote the forward metric. Both scenarios estimate terminal value at N and discount it to time 0 using the same factor.

The link contains your active cash flow, rates, year convention and terminal time. Anyone with it can read those values. Copy and CSV contain result data; they do not create a public link.

3 min read 3 steps 7 terms 3 examples 6 FAQs TV_N = CF_N+1 / (r−g); CF_N+1 = CF_N×(1+g) when input is CF_N

Choose final explicit-year CF_N or next-year CF_N+1.

YMYL Reviewed by Calculover Editorial Review · Updated 2026-08-11 · 3 sources

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Walk-through

How to Use This Calculator

3 steps

Choose the cash-flow year and assumptions

Choose final explicit-year CF_N or next-year CF_N+1. Growth is applied once to CF_N and never twice to CF_N+1. TV is at year N; PV is at time 0 with end-year terminal timing.

Read the terminal value and present value

Read TV_N and PV_0 together. Enable the exit cross-check only with a separately entered metric, quoted period and matching EV multiple; no metric is copied from cash flow.

Stress-test your assumptions

Select a grid cell or use the list for exact cash flow, spread, factor, TV_N and PV_0. Change the display basis without changing inputs. Invalid cells remain unavailable.

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Reference

Formula & Methodology

3 formulas

Gordon growth terminal value

TV_N = CF_N+1 / (r−g); CF_N+1 = CF_N×(1+g) when input is CF_N

Choose final explicit-year CF_N or next-year CF_N+1. Growth is applied once to CF_N and never twice to CF_N+1. TV is at year N; PV is at time 0 with end-year terminal timing. Require r>g, both above −100%, and whole N≥0. A zero or negative cash flow stays signed. A tiny positive r−g can produce huge sensitivity; no enterprise-value share is known without explicit-period value.

Present value of terminal value

PV of TV = TV / (1 + r)^n

Terminal timing stays at N and PV is at time 0; explicit-period or midyear cash flows must be valued separately. The forward metric, if chosen, must match the entered forward EV multiple.

Compare a matching exit multiple

TV_N = Metric_period × EV/Metric_period; PV_0 = TV_N × (1+r)^(−N)

The optional exit multiple is a relative-valuation cross-check, not an observed market quote or an intrinsic-price guarantee. No enterprise total or terminal share is inferred without explicit-period value.

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YMYL

Trust, Methodology & Sources

Reviewed by Calculover Editorial Review · Updated 2026-08-11 · 3 sources

Editorial accountability

Author: Quinn Sumner - Editor

Owner: Quinn Sumner - Editorial owner

Reviewer: Calculover Editorial Review - Source and limitation review

Last reviewed: 2026-08-11

Last verified: 2026-08-11

Data effective: 2026-08-11

Methodology

Assumption: The calculator assumes cash flows grow at a single constant rate forever, starting one year after the final forecast period entered by the user.

Assumption: The discount rate is assumed to be constant across all future periods and is not independently validated against the user's actual cost of capital.

Assumption: The model does not account for cyclicality, competitive disruption, or a gradual transition to a lower or higher growth phase — it treats growth as an immediate step to a permanent constant rate.

Assumption: Choose final explicit-year CF_N or next-year CF_N+1. Growth is applied once to CF_N and never twice to CF_N+1. TV is at year N; PV is at time 0 with end-year terminal timing.

Limitations & guidance

Require r>g, both above −100%, and whole N≥0. A zero or negative cash flow stays signed. A tiny positive r−g can produce huge sensitivity; no enterprise-value share is known without explicit-period value.

This calculator does not validate whether the entered growth rate is realistic for the company or economy in question, or whether the entered discount rate reflects the company's true cost of capital.

Professional guidance: This calculator is an educational tool designed to illustrate the Gordon growth terminal value formula and does not constitute investment advice, a financial recommendation, or a solicitation to buy or sell any security. Consult a licensed Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), or corporate finance professional before making investment or capital allocation decisions.

Primary sources

Gordon, M.J. & Shapiro, E. (1956) — Capital Equipment Analysis: The Required Rate of Profit

Aswath Damodaran — Estimating Terminal Value (NYU Stern)

CFA Institute — Equity Asset Valuation: Free Cash Flow Valuation

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Glossary

Key Terms Explained

7 terms

Terminal value Require r>g, both above −100%, and whole N≥0. A zero or negative cash flow stays signed.

Gordon growth model Also called the constant-growth or perpetuity-growth model, it values a stream of cash flows that grows at a fixed percentage rate indefinitely, using the formula CF x (1 + g) / (r - g).

Perpetuity A stream of equal (or steadily growing) cash payments that continues forever with no end date. Terminal value is a growing perpetuity that begins the year after the explicit forecast period ends.

Discount rate The rate used to convert future cash flows into their equivalent value today, reflecting the time value of money and the riskiness of the cash flows. In corporate valuation this is usually the weighted average cost of capital (WACC).

WACC Weighted Average Cost of Capital — the blended rate of return a company must generate to satisfy both its equity and debt investors, commonly used as the discount rate r in DCF and terminal value calculations.

Continuing value Another common name for terminal value, emphasizing that it captures the value the business continues to generate after the explicit projection period ends.

Present value The current worth of a future sum of money, calculated by discounting it back using a chosen discount rate. The present value of terminal value is what that far-future lump sum is worth in today's dollars.

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Scenarios

Real-World Examples

3 worked examples

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Mature company, low growth

Stable industrial with modest long-run growth

Final Year Cash Flow $1,000,000 Growth Rate (g) 2.5% Discount Rate (r) 9.0% Discount Periods (n) 5

CF_N+1=$1,025,000; TV_N=$15,769,230.77 and PV=$10,248,918.01 at time 0. The 6.5percentage-point spread does not establish reliability; nearby assumptions still change the valuation.

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Narrow spread stress test

Discount rate close to growth rate

Final Year Cash Flow $1,000,000 Growth Rate (g) 6.0% Discount Rate (r) 7.0% Discount Periods (n) 5

With only a 1-percentage-point spread between r and g, terminal value balloons to $106M — over six times larger than the baseline scenario despite the same starting cash flow. This illustrates why analysts scrutinize the (r - g) spread closely: a narrow spread makes the valuation extremely sensitive to small assumption changes, visible directly on the Sensitivity tab.

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Invalid assumption

Growth rate at or above the discount rate

Final Year Cash Flow $1,000,000 Growth Rate (g) 8.0% Discount Rate (r) 7.0%

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Reference

Cite This Calculator

APA & MLA

Use either format to cite this calculator in a paper, report, or resource list.

APA

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Deep Dive

Understanding the Terminal Value Calculator

3 chapters · 3 min read

Choose final explicit-year CF_N or next-year CF_N+1. Growth is applied once to CF_N and never twice to CF_N+1. TV is at year N; PV is at time 0 with end-year terminal timing.

How the Terminal Value Calculator works

Choose final explicit-year CF_N or next-year CF_N+1. Growth is applied once to CF_N and never twice to CF_N+1. TV is at year N; PV is at time 0 with end-year terminal timing.

Inputs and what they mean

Review the long-run growth assumption g against the valuation currency, inflation and a sustainable mature business.

Limits and edge cases

Negative cash flow remains a negative continuation value; review whether a perpetual-loss assumption is economically appropriate.

Terminal timing stays at N and PV is at time 0; explicit-period or midyear cash flows must be valued separately. The forward metric, if chosen, must match the entered forward EV multiple.

Inputs stay in local storage rather than being written to the public URL. Share opens a disclosure preview; exit assumptions are excluded unless selected. Anyone with a copied link can read its values. Copy and CSV contain financial results.

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Questions

Frequently Asked Questions

6 questions

What is the terminal value formula?+

Choose final explicit-year CF_N or next-year CF_N+1. Growth is applied once to CF_N and never twice to CF_N+1. TV is at year N; PV is at time 0 with end-year terminal timing.

Why does the formula require the discount rate to exceed the growth rate?+

What is a typical long-run growth rate (g) to use?+

Review the long-run growth assumption g against the valuation currency, inflation and a sustainable mature business. Require r>g, both above −100%, and whole N≥0. A zero or negative cash flow stays signed.

What percentage of total DCF valuation does terminal value usually represent?+

What is an alternative to the Gordon growth method?+

The exit multiple method estimates terminal value by applying a valuation multiple (such as EV/EBITDA) observed for comparable companies to the final projected year's financial metric, instead of assuming perpetual growth. It is often used as a cross-check against the Gordon growth result.

How sensitive is terminal value to small changes in g and r?+

Very sensitive. Because terminal value divides by (r - g), a small change to either input can swing the result by double-digit percentages when the spread between r and g is narrow. Use the Sensitivity tab to see the full range of terminal values across nearby growth and discount rate assumptions.

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Terminal Value Calculator

Exit-multiple comparison

How to Use This Calculator

Choose the cash-flow year and assumptions

Read the terminal value and present value

Stress-test your assumptions

Formula & Methodology

Trust, Methodology & Sources

Key Terms Explained

Real-World Examples

Cite This Calculator

Understanding the Terminal Value Calculator

How the Terminal Value Calculator works

Inputs and what they mean

Limits and edge cases

Frequently Asked Questions

Get a branded PDF of your results

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Guides & articles

Glossary terms