<h3>Valuation of The Trade Gateways</h3>

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The valuation is based on expected future cashflows. These

cashflows are discounted by a discount factor, which is made up from the

opportunity cost, the company risk and the market related risk

The risk free rate the opportunity cost, the market premium is the company

risk and Beta is the market related risk. This model uses the below formula

Net present value = (The sum of expected profits in years 1-5 + the constant

growth value of cashflows beyond year 5) all divided by the Discount rate =

risk free rate + (company risk pemium + Beta)

The Terminal Value also needs to be added.

Terminal value (TV) is the value beyond the forecasted period when future cash flows can be estimated. Terminal value assumes growth at a set growth rate forever after the forecast period.

Terminal Value (perpetual growth)

@ g = 10.0%

OR Terminal Value (other)

Free Cash Flows

0

Risk Free Rate 6.00%

Market Premium 12.00%

Beta 3.00

Discount Rate: (%) 42.00%

Present Value: £3,319,789

394120 788000 1306840 1871840 2670320

Less tax at 20%

Net Income (£) 315,296 630,400 1,045,472 1,497,472 2,669,396

Terminal Value (Perpetual Growth) 9176047

Free Cash Flows

315,296 630,400 1,045,472 1,497,472 11,845,443

Present Value: $3,319,789

What Is Terminal Value (TV)?

Terminal value (TV) is the value of an asset, business, or project beyond the forecasted period when future cash flows can be estimated. Terminal value assumes a business will grow at a set growth rate forever after the forecast period. Terminal value often comprises a large percentage of the total assessed value.

KEY TAKEAWAYS

Terminal value (TV) determines a company’s value into perpetuity beyond a set forecast period—usually three to five years.

Analysts use the discounted cash flow model (DCF) to calculate the total value of a business. The forecast period and terminal value are both integral components of DCF.

The two most common methods for calculating terminal value are perpetual growth (Gordon Growth Model) and exit multiple.

The perpetual growth method assumes that a business will generate cash flows at a constant rate forever, while the exit multiple method assumes that a business will be sold.