Quick Definition

Terminal Value (TV) is the estimated future value of a business or cash flows beyond a specific forecast period, used in financial modeling to assess long-term performance.

Formula

Examples

• 1In a discounted cash flow (DCF) model, an analyst estimates the terminal value of a company to determine its worth at the end of a 10-year forecast period.
• 2A private equity firm calculates the terminal value of a portfolio company to evaluate the potential exit value at the time of selling the company.
• 3An investor uses terminal value to estimate the future value of an ongoing project's cash flows to decide on further investment or divestment.

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