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.
Updated 2026-09-03
The sum of present values is every discounted year of the explicit projection, added together. It is the part of the valuation Angie modelled year by year, as opposed to the part it collapsed into a terminal value.
It is usually the smaller half, and often much smaller. Across a live 68-name basket on 2026-09-05, the explicit projection accounted for about 29 percent of enterprise value at the median. The rest came from the terminal.
Microsoft's five projected years on 2026-09-05, at a 10.49 percent discount rate with 16 percent year-one growth fading toward 3 percent. Projected cash flow, then its present value.
Notice that the discounted figures barely move even as the cash flows grow by a third. Growth and discounting are pulling in opposite directions, and at a 10 percent rate they roughly cancel over five years. That is worth internalising: extending the explicit horizon changes a valuation far less than people expect, unless growth genuinely exceeds the discount rate.
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.
