Enterprise Value is the present value of the post-tax cash flows for a business into the future.

Where:

- C1, C2, C3 - the cash flow in period 1, 2, 3, ...
- r - the discount rate

To capture the cash flows into the future a terminal value is calculated via a perpetuity calculation -

based on the final years forecast post-tax free cash flow.

Where:

- Cn - the cash flow in the final forecast period.
- LTG - the long-term growth rate
- r - the discount rate
- g - the terminal growth rate

The Capital Asset Pricing Model (CAPM) is used to determine the equity component in the discount rate.

Where:

- rt - the risk free rate
- t - the tax rate
- B - the beta of the company
- MRP - the Market Risk Premium

Valuecruncher uses an estimate of Weighted Average Cost of Capital (WACC) to determine the discount rate in the calculation.