Terminal value is usually calculated with the constant growth (Gordon) model or the exit multiple method. Because it can make up a large part of total value, the long-term growth rate assumption must be chosen carefully.
Related terms
Discounted cash flow (DCF)A valuation method based on discounting the free cash flows an asset or company will generate in the future to the present using an appropriate discount rate.Multiples methodEstimating value using ratios of comparable companies' market values, or of prices paid in comparable transactions, to financial indicators.BetaA coefficient measuring the sensitivity of a share's return to changes in the market return, that is, its systematic risk.Break-even pointThe sales volume or amount at which total revenue equals total cost and the business makes neither profit nor loss.Capital asset pricing model (CAPM)A model that calculates the cost of equity from the risk-free rate, beta and the market risk premium.Completion accountsFinancial statements prepared as at the closing date of an acquisition, through which the final price is set by net debt and working capital adjustments.
Last updated: October 22, 2026 · This definition is for general information only.