Electro-Sensors, Inc. (ELSE)
|Growth in perpetuity method:|
|Long-term growth rate|
|Free cash flow (t + 1)||0.35|
|Present Value of Terminal Value||11.10|
Now that we’ve estimated the free cash flow generated over the five-year forecast period, we need to estimate the value of Electro-Sensors, Inc.’s cash flows after that period (if we don’t include this, we would have to assume that Electro-Sensors, Inc. stopped operating at the end of the five-year forecast period). To do so, we’ll determine the company’s terminal value.