Terminal value is the sum of all cash flows from an investment or project beyond a forecast period based on a specified rate of return.

Terminal value is a significant factor in gauging cash flow.

**Formula to calculate terminal value.**

FCF = free cash flow

g = perpetual growth rate of FCF

WACC = Weighted average cost of capital

**Example:**

Assuming the WACC is 10% and the perpetual growth of free cash flow is 4%, if the forecast shows that 2020 free cash flow will be $60. Calculate the terminal value as at 2018.

Therefore, the terminal value as at 2018 was $1,040.