Identify the factors used to   determine the terminal value estimate.

Calculating cash flow | 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. Terminal value is determined by several factors, including the expected average annual growth of future cash flow, revenue, and expenses after a certain period, a discount (which usually corresponds to an appropriate capital cost) which takes into consideration any risks associated with investment in this firm, and estimations of how long it will operate at its current levels. This information is used to estimate the value of future cash flows that are expected beyond a particular point.