Angie · learn
Sum of PV
Every discounted free cash flow across the explicit projection horizon, added up. Everything after the horizon is handled by the terminal value instead.
A fuller explanation of this one is still being written. The definition above is the short answer.
See also
- Present value — What a future year's free cash flow is worth in today's money.
- Terminal value — Everything the business is worth beyond the projection horizon, set by Gordon growth or an exit multiple and then discounted back. It is usually the majority of the answer.
- Horizon — How many years are projected explicitly before the terminal value takes over. Longer horizons matter only when growth genuinely exceeds the perpetual rate.
- Enterprise value — The value of the whole operating business, before asking who has a claim on it. Debt holders are paid before shareholders, so this is not yet what the shares are worth.
Educational content, not investment advice. Angie explains how a valuation is built so you can judge it yourself. What you do with that is your call.
