TV
Terminal Value
Short definition
Terminal value is the (horizon) value of cash flows after the explicit forecast. It is built with Gordon growth or an exit multiple; a large share of EV means dependence on the long-term assumption.
Detailed explanation
Gordon: TV = FCFF_{n+1}/(WACC−g), with g < WACC required. An exit multiple applies a market turn to horizon EBITDA; at a cycle peak the multiple is optimistic.
For a finite-life project, use salvage and NWC recovery instead of TV. If TV/EV is high, sensitivity must be visible in the report.
Why it matters for the CFO
The CFO knows how much of value sits “after year 5”; otherwise the investment decision is not hanging on explicit-period cash.
How it is calculated
TV_Gordon = FCFF_{n+1} / (WACC − g) veya TV_exit = Çarpan × FAVÖK_n
Variables in the formula
- TV: Value after the explicit period
- g: Perpetual growth (less than WACC)
How to read it
TV/EV of 70% diagnoses a weak explicit period or a tight g/WACC spread. It is a diagnosis, not a threshold.
Numerical example
FCFF_6 = 50 mn TL, WACC 18%, g 3% → TV = 50 / (0.18−0.03) = 333 mn TL (end of year 5).
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Definitions are educational. They are not investment, credit or tax advice.