[nikitasia]

If growth and cost of equity is given (or you have to calculate yourself), use the dividend valuation model to calculate the terminal value. In other words, terminal value means in perpetuity. 😀 hope that helped you !

The Do is equals to the cash flow of the year before perpetuity. Plus, don’t forget to times the discount factor of the previous year !

Example (given g=4%, Ke=10%):

Year 0 Cashflow = (1000) DF 10% = 1.000 PV = (1000)
Year 1 = 300 = 0.909 PV = 272.7
Year 2 = 1000 = 0.826 PV = 826
Thereafter (Terminal value) Cashflow = 1000(1+0.04)/0.1-0.04
DF = 0.826
PV = 14317.3

NPV = 14416

Like that :).

[nikitasia]

thank you very much! Totally needed that 🙂 you’re good!

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