There are different methods to estimate terminal value in a DCF valuation. You can estimate terminal value in a DCF valuation using any of the common methods: perpetual growth rate, multiples of earnings, cash flows or revenues or less common methods such as orderly liquidation value; or a fire sale value. The method you chose depends on the stage the company and expected growth drivers as well as the information available.
Each method has its advantages and disadvantages! In this page, we address the question: “What are the draws backs of the perpetual growth approach to terminal value? How do you address this?”