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3min chapter
TIP515: The Little Book of Valuation by Aswath Damodaran
We Study Billionaires - The Investor’s Podcast Network
How to Estimate the Terminal Value of a Business
The value of the business at the end of the forecasting period is also called the terminal value. Having some sort of end date can help make our intrinsic value calculations much more accurate. A simple example would be to take a relatively stable company like Apple, project out their future free cash flows for say 10 years and put a conservative multiple on the business at year 10. Then you can discount that terminal value back to today rather than trying to estimate the cash flows from that point forward.
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