1. What is Non-Constant Growth Valuation?

Non-constant growth valuation is a method used to determine the present value of an investment with cash flows that grow at different rates over time, followed by a terminal value representing the value beyond the forecast period.

2. How Does the Calculator Work?

The calculator uses the non-constant growth valuation formula:

Where:

• \( CF_t \) — Cash flow in period t
• \( r \) — Discount rate
• \( TV \) — Terminal value
• \( n \) — Number of periods

Explanation: The formula discounts each cash flow to present value and sums them, then adds the discounted terminal value.

3. Importance of Non-Constant Growth Valuation

Details: This method is crucial for valuing companies or investments with irregular growth patterns, such as startups, companies in turnaround situations, or those with temporary competitive advantages.

4. Using the Calculator

Tips: Enter cash flows as comma-separated values (e.g., 100,150,200), discount rate as percentage (e.g., 10 for 10%), and terminal value in USD. All values must be valid positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: When should I use non-constant growth valuation?
A: Use it when cash flows are expected to grow at different rates in different periods before stabilizing.

Q2: How do I determine the terminal value?
A: Terminal value can be calculated using perpetuity growth method or exit multiple method.

Q3: What discount rate should I use?
A: Typically the weighted average cost of capital (WACC) for companies or required rate of return for investments.

Q4: What are the limitations of this method?
A: It's sensitive to discount rate and terminal value assumptions, and forecasting distant cash flows can be uncertain.

Q5: Can this be used for dividend-paying stocks?
A: Yes, if dividends are expected to grow at varying rates before stabilizing.