Terminal Value

Now that we’ve estimated the free cash flow generated over the five-year forecast period, we need to estimate the value of American Century Zero Coupon 2025 Fund Investor Class’s cash flows after that period (if we don’t include this, we would have to assume that American Century Zero Coupon 2025 Fund Investor Class stopped operating at the end of the five-year forecast period). To do so, we’ll determine the company’s terminal value.