Terminal Value Methods

This problem practices a core DCF concept, how to estimate the value of a business beyond the explicit forecast period. Candidates need to understand the two standard approaches, the perpetual growth method and the exit multiple method, and when each is used. Interviewers ask this because terminal value usually makes up a large part of total valuation, so a strong answer shows you can think about long term cash generation, discounting, and market based valuation assumptions. It also tests whether you can explain the logic behind using steady state cash flow growth or a comparable valuation multiple in a mature period.