It is defined as the value of a company’s expected cash flow for all years beyond the projection period in a DCF analysis. In discounted, since one cannot estimate cash flows forever, its estimation is stopped sometime in the future and then a terminal value is calculated that reflects the value of the firm at that point.
The terminal value can be calculated by several methods. In one of the methods, it is assumed that the company will cease to operate at a point in time in the future and sell the assets it has accumulated to the highest bidders. The estimate that emerges is called a liquidation value. This approach is called Exit or Terminal Multiple Approach. On the other hand, the perpetuity growth method assumes that the company will continue its historic business and generate free cash flows at a constant rate forever.