Terminal Value, Fade Period and Multiples

This webpage demonstrates the difference in alternative terminal value methods including the growth rate method, the value driver method and use of a fade period. I hope to have finally make a model with alternative growth rates, returns and cost of capital that illustrates problems with alternative methods. I also demonstrate the importance of making normalization adjustments in the terminal period when using the growth rate method. My method of demonstrating problems with alternative terminal value methods uses a theoretical long-term model which demonstrates the true value with different growth rate patterns. The excel file with the alternative models is attached to the button below. The alternative models include the theoretical model, a growth rate model (with and without stable period adjustments); the value standard value driver model (named the black box model); the value driver model with a sudden and immediate change to the return in the terminal period; and a value driver model with a fade period.

Excel File with Analysis of Alternative Terminal Methods with Fade Period, Value Driver Methods and Stable Adjustment