Use the Gordon Growth Model: Terminal Value = Final Year Free Cash Flow × (1 + g) / (WACC − g)
Use the Exit Multiple Method: Terminal Value = Final Year Metric × Exit Multiple
Project the final year free cash flow before calculating terminal value
Choose a perpetual growth rate that is below the discount rate
Use a discount rate such as WACC for the valuation
Apply the terminal value at the end of the forecast period
Discount the terminal value back to present value using the discount rate
Ensure the exit multiple is based on comparable companies or transactions
Use consistent assumptions across cash flows, growth, and discount rate
Check that terminal value does not dominate the total valuation unrealistically