Predictions become more obscure as the time horizon lengthens. This is also true in finance, especially when it comes to estimating a company’s future cash flows. At the same time, companies must be valued. To solve this problem, analysts use financial models, such as discounted cash flows (DCF), along with certain assumptions to derive the total value of a business or project. Discounted cash flow (DCF) is a popular method for studies, business acquisitions and stock market valuation. This method is based on the theory that the value of an asset is equal to all future cash flows derived from that asset. These cash flows must be discounted to their present value at a discount rate representative of the cost of capital, such as the interest rate. DCF has two main components: forecast period and terminal value. The forecast period is usually about five years. Anything longer than that and the accuracy of the projections suffer. This is where the terminal value calculation becomes important. There are two methods commonly used to calculate the terminal value: perpetual growth (Gordon Growth Model) and multiple productions. The former assumes that a business will continue to generate cash flow at a constant rate forever, while the latter assumes that a business will grow by being sold for a multiple of a market metric. Investment professionals prefer the multiple exit approach while academics prefer the perpetual growth model.