There are two general methods:
(1) Where the company doesn’t have defined life ( most of the businesseses): Use 3-5 years for high growth(Hg), next 3-5 years for medium growth (Mg) and then project with a sustainable growth rate until infinity ( using gordon growth model).Practically 3-8 years is only projected and infinity is covered using gordon growth formula.
(2) Companies having defined life- like power project or road toll project- these generally have 15-30 years of defined life- yes defined life as govt signs definite agreement-The analyst needs to project for the whole of this 30 years and do Project IRR, equity IRR, NPV analysis. One should not project beyond this 30 years until unless the infrastructure contract defines very clearly what would happen after 30 years.
