Hi, can you please inform the formula used for the Growth Value and Terminal Value under the section of Company Value in Stock Fair Value Calculator
Sure! Here’s the formula used for determining the Intrinsic value (IV) in the FAIR VALUE CALCULATOR!
IV of a company = growth value + terminal value
Growth Value = EPS * X * (1 - X‚Åø) / (1 - X)
Terminal Value= EPS * X‚Åø * Y * (1 - Y‚Å±) / (1 - Y)
Where, X = (1 + g) / (1 + r)
And Y = (1 + t) / (1 + r)
EPS = Earnings Per Share
g = growth rate
n = No of years with the estimated growth rate (g)
t = terminal growth rate
i = No of years in the terminal value (t)
r = discount rate
I hope this is useful. Cheers!
Thank you Mr.Kritesh. Regards
The Present Value of the Terminal Value is then added to the PV of the free cash flows in the projection period to arrive at the implied enterprise value. If the growth rate in perpetuity is not constant, a multiple-stage terminal value is calculated.