Terminal Value

Advance Auto Parts, Inc. (AAP)


+1.86 (+0.97%)
Growth in perpetuity method:
Long-term growth rate
WACC (%) 7.02
Free cash flow (t + 1) 549.50
Terminal Value 10,946.24
Present Value of Terminal Value 7,797.23

Now that we’ve estimated the free cash flow generated over the five-year forecast period, we need to estimate the value of Advance Auto Parts, Inc.’s cash flows after that period (if we don’t include this, we would have to assume that Advance Auto Parts, Inc. stopped operating at the end of the five-year forecast period). To do so, we’ll determine the company’s terminal value.