1. What is Non Constant Growth Firm Valuation?

The Non Constant Growth Firm Valuation model estimates the present value of a company's future free cash flows when growth rates are expected to change over time. It combines short-term projections with a terminal value calculation for perpetual growth.

2. How Does the Calculator Work?

The calculator uses the Gordon Growth Model for the terminal value:

Where:

• \( FCFF_1 \) — Expected free cash flow in period 1 (USD)
• \( WACC \) — Weighted average cost of capital (decimal)
• \( g \) — Perpetual growth rate (decimal)

Note: For non-constant growth, this would be combined with discrete period valuations before the terminal period.

3. Importance of Firm Valuation

Details: Accurate firm valuation is crucial for investment decisions, mergers and acquisitions, financial reporting, and strategic planning.

4. Using the Calculator

Tips: Enter FCFF in USD, WACC as decimal (e.g., 0.08 for 8%), and growth rate as decimal. WACC must be greater than growth rate for the model to work.

5. Frequently Asked Questions (FAQ)

Q1: When is this model appropriate?
A: For companies expected to reach stable growth after an initial high-growth period.

Q2: What are typical WACC values?
A: Usually between 6-12% for most companies, depending on industry and risk.

Q3: What growth rate assumptions are reasonable?
A: Long-term growth should not exceed the economy's nominal growth rate (typically 2-5%).

Q4: How to handle non-constant growth periods?
A: Value each high-growth period separately before applying terminal value.

Q5: What are the model's limitations?
A: Assumes constant growth forever, which may not reflect business cycles or disruptions.