Business & Finance homework help| Business & Finance homework help

The factors used to determine the terminal value estimate include the expected growth rate of cash flows in subsequent years, the discount rate applied to future cash flows, and assumptions about the company’s expected lifespan. Calculating the terminal value involves taking into consideration several factors, such as an estimated annual growth rate of future cash flows or revenue after a specific period, a discount rate that is equal to an appropriate capital cost, which takes into account risk when investing in this company, and estimations of how long this company can continue to operate at its current level. The factors used are combined to determine an estimate of the present value of all future cash flows.