What does the terminal value typically represent in a DCF?
- A The majority of the total valuation, covering cash flows beyond the forecast period
- B A small residual amount
- C The liquidation value only
- D The initial investment
Answer
The majority of the total valuation, covering cash flows beyond the forecast period
Because it dominates the result, the perpetuity growth rate or exit multiple assumption deserves the most scrutiny in the model.





