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Terminal Value

Microsoft Corporation

Microsoft Corporation (MSFT)

Technology

Growth in perpetuity method:
Long-term growth rate
WACC (%) 11.69
Free cash flow (t + 1) 61,929.78
Terminal Value 805,328.68
Present Value of Terminal Value 463,342.04



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