Detailed explanation
TV is a critical DCF input because it typically represents 40-60% of total discounted value. Formula: TV = (NOI year N+1 × (1 + growth)) / Exit cap rate, less disposal costs (~2%). The exit cap rate is typically the entry cap rate + 25-50 bps to reflect asset ageing over the holding period. TV is then discounted back to present using the WACC. Sensitivity analysis should flex exit cap and long-term growth to test the outcome.
Moroccan example
A 10-year DCF on a Casablanca CFC office building: NOI year 11 = 11 M MAD, exit cap 7.5% → TV gross = 147 M MAD, net after 2% disposal = 144 M MAD. Discounted at WACC 9% for 10 years = ~61 M MAD PV.
Related terms
Discounted Cash Flow (DCF) →Capitalisation Rate (Cap Rate) →WACC (Weighted Average Cost of Capital) →
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