Component |
Description |
Free Cash Flow |
The total free cash flow expected at the end of the forecast period. |
Growth Rate |
The expected growth rate of free cash flows beyond the forecast period. |
Discount Rate |
The rate used to discount future cash flows to their present value. |
Horizon Value |
The value of a business or project at the end of the forecast period, also known as terminal value. |
Formula |
Horizon Value = Free Cash Flow / (Discount Rate – Growth Rate) |
Purpose |
Used to estimate the value of a business or project at the end of the forecast period, considering future growth and discount rates. |