Terminal Value

First American Financial Corporatio... (FAF)


+1.58 (+3.43%)
Growth in perpetuity method:
Long-term growth rate
WACC (%) 7.15
Free cash flow (t + 1) 1,717.43
Terminal Value 33,348.13
Present Value of Terminal Value 23,610.79

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