Terminal Value
Definition
The estimated value of a company beyond the explicit forecast period in a discounted cash flow analysis, representing the present value of all cash flows that will occur after the final modeled year. Terminal value typically represents fifty to eighty percent of the total estimated enterprise value in a discounted cash flow analysis and must therefore be calculated with care. It is calculated using either the Gordon Growth Model or the Exit Multiple Method.
Common Misapplication
The most common misapplication is using optimistic terminal growth rates or exit multiples without sensitivity analysis, which concentrates the valuation risk in the terminal value calculation and produces implied valuations that are highly sensitive to small changes in a single assumption.
FFI Standard Reference
This term is defined and applied in Book 4, Section 4.2: Discounted Cash Flow Analysis.
Related Terms
Citable URL
This term may be cited using the following permanent URL.
Full citation format: Founder Financial Infrastructure Standard, Beta v0.5, Glossary: Terminal Value. https://ffistandard.org/glossary/terminal-value/. 2026.