Long-term growth rate

The long-term growth rate is the slow, steady growth rate a discounted cash flow model assumes a company will sustain forever, once its explicit forecast years end. It feeds directly into the terminal value calculation, the lump sum standing in for everything the business generates beyond the forecast.

It deserves a much more conservative number than any growth rate used in the forecast years themselves. No company can outgrow the broader economy forever, eventually it would become the entire economy, so something in the neighborhood of long-run GDP growth, often 2-3%, is the usual anchor. It also has to stay below the discount rate used in the model, or the terminal value formula breaks down entirely.