Terminal Value
Terminal value refers to the value of an asset, business, or product beyond the forecasted period. It is useful when creating financial models, more specifically discounted cash flow valuations. The two most common forms of forecasting used to determine a businesses terminal value include: the perpetual growth model and the exit multiple model. It is possible to achieve negative terminal value if the cost of future capital exceeds the assumed growth rate, but is not sustainable.Here’s a helpful tool that visualizes the impact of your burn and growth rate on your terminal value, profitability, and break even point.