Estimating the terminal value in a DCF valuation

How to estimate the terminal growth rate in a discounted cash-flow valuation

[SagarPatel-gwub]

Hi Michael...this is super, super helpful and helped me understand a lot which I am been searching from a while. However, I have a question, after having TV, how to approach to calculate price/free cash flow? Instead of price/EBIT ? Would be awesome if you can take any real life ticker as an example to get to TV to price/FCF. Thank you bunch!

[Unknowledgeable]

2:09
Why does g have to be less than wacc?
5:30
6:30
Terminal value is calculated using a perpetuity calculation
- terminal value approaches infinity meaning explosion of value
7:12
But I think these represent the dollar amount of completed transactions in the economy. And this gdp and its growth rate can be a good proxy for the growth rate of the free cash flows of the firm because the free cash flows of the firm increases when it successfully completes more transactions.
So maybe we caj assume that the transaction growth rate of the firm is the same as the transaction growth rate of the economy. Do you think this is a reasonable argument for why they compare g with the gdp growth rate?

[afonsoluz]

Hey, this is very important. Where did you see the historical growth rate of GDP between 1872 and today? Thank you.

[omm]

Very helpful. I believe you meant 'GDP growth' not 'GDP.'

[thprodigy]

What if the company has FCF? what do we need to do in order to estimate a reasonable positive Future FCF for DCF model to work?

[piranha_finance]

Hi Michael, is the WACC value used pretax or aftertax?

[TheWanderercontent]

Which WACC to use if the cost of debt is 0% and there is no equity ? The case of a startup ?

[shivangiagrawal]

Can you tell why growth rate subtract from wacc