DCF & WACC
What is the present value of a simple perpetuity, and how does that connect to the DCF terminal value?
Model answer
A perpetuity paying a constant cash flow CF forever has PV = CF / r. Example: $100 per year at a 10% discount rate is worth 100 / 0.10 = $1,000 - an infinite stream converges to a finite value…
The full, human-reviewed answer is in the bank.
Sign up free and Daily 10 serves you 10 questions a day from all 1,500+ — or go Pro for unlimited reps.
More from DCF & WACC
- Walk me through a DCF.
- Why do you use unlevered free cash flow in a DCF and how do you calculate it?
- What is WACC and how do you calculate it?
- What are the two ways to calculate terminal value, and how do they differ?
- What discount rate do you use if you're discounting levered free cash flow?
- Two identical companies, one has more debt. Which has the higher WACC?