Macro anchor
DCFDeriving terminal growth from long run nominal GDP, the ceiling any perpetual growth rate has to sit under.
Perpetuity growth must be sustainable literally forever, so it cannot exceed the growth of the economy the company sells into. Anything above long run nominal GDP implies the company eventually becomes the entire economy.
Nominal GDP decomposes into two components you can look up separately: expected long run inflation plus long run real growth. For the euro area that is roughly 2% inflation against perhaps 1% to 1.5% real, so nominal lands around 3% at the top end.
The currency of the cash flows sets the rate, not the company's ambition. Sterling, Swiss franc and emerging market cash flows each have their own answer, and a euro forecast growing at an emerging market rate has an inconsistency nobody intended.
It gives a ceiling rather than an answer. Most businesses should sit below it, and only a company genuinely expected to grow with the whole economy in perpetuity belongs at the top of the range.
Worked example
Euro area long run inflation of about 2.0% plus long run real growth of about 1.2% gives nominal GDP growth of roughly 3.2%.
That is the ceiling. A terminal growth rate above it implies the company eventually becomes the entire economy.
Sterling, Swiss franc and emerging market cash flows each have their own answer, so the currency of the cash flows sets the bound rather than the company's ambition.