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Terminal Value Myth 5: The Terminal value ate my DCF!
Description
In a DCF of a business, the terminal value will account for a large proportion of value and this is viewed by some as a flaw in DCF and by others as a license to not worry about assumptions made during growth periods. Both presumptions are wrong. A DCF is a mirror of how you make money investing in stock, with the terminal value playing the role of capital gains (price appreciation). Also, the terminal value, though a high proportion of value, is heavily affected by your growth assumptions (about level & efficiency).
Slides: http://www.stern.nyu.edu/~adamodar/pdfiles/blog/TermValyeMyth5.pdf
Blog Post: http://aswathdamodaran.blogspot.com/2016/11/myth-55-terminal-value-ate-my-dcf.html
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