Valuation Terms
Terminal Value
The estimated value of a business beyond the explicit forecast period in a DCF model.
Also called: continuing value
What it means
Terminal value is the portion of a DCF model that captures the value of cash flows after the detailed forecast years end. Because it covers so much of the future, it often makes up a large share of the final valuation estimate.
Why it matters
Users should know that many valuation models depend heavily on long-run assumptions, not just the first few forecast years.