Why some DCFs have a “Terminal Value” — and some don’t.

When doing a valuation, we often see a terminal value added at the end of the DCF model.
But not every company has one. Why?

For companies that can be assumed to continue operating indefinitely — like manufacturers, trading firms, or service businesses — analysts usually project cash flows for 5  years, then assume a terminal growth rate (sometimes even zero to be conservative).
That terminal value represents all future cash flows beyond the explicit forecast period.

But for companies with a finite project life, like:

• a solar farm with a 25-year contract,
• a mine that runs out of reserves, or
• a concession that expires,

the analyst will project cash flows only until the end of the project life.
After that, there’s simply no more cash flow — and therefore, no terminal value.

In short:
🔹 Terminal value = for ongoing businesses
🔹 No terminal value = for projects with a clear end date

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If you’re investing in or selling a business, we’ll help you understand what’s behind the numbers.
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