A forecast covers five or ten years, but a business keeps going. The terminal value (TV) stands for every year after the last forecast year. It's often more than half of a DCF's value, so small changes in its inputs matter. There are two methods:
Perpetuity growth: TV = FCF x (1 + g) / (WACC - g). Grow the final year's free cash flow by one year, then divide by WACC minus a long-term growth rate. Keep g near long-run economic growth, typically 2% to 3%, and always below WACC.
Exit multiple: TV = final-year EBITDA x an EV/EBITDA multiple taken from comparable companies or deals.
Either way, the TV is a value as of the end of the final forecast year, so discount it to today: TV / (1 + WACC)^N.
Then cross-check. Divide the perpetuity growth TV by final-year EBITDA to see the multiple it implies, or back out the growth rate the exit multiple implies. If either looks unrealistic, such as 5% growth forever, revisit the inputs.