The Residual Value represents the present value of future cash flow for year six and beyond in the DCF model pro forma.
To calculate the DCF valuation, we start by building a pro forma for the next five years (based upon the growth rate you anticipate, as well as the historical performance of the firm). Once we project the cash flow (i.e., EBOC) for those five years, we then discount each amount back to present day value (based on your Total Discount Rate).
The total present value (first, dark gray block of the DCF equation) is equal to the sum of the EBOC present value amounts for the five years of the pro forma (see the last line in the pro forma table).
We believe these business should not be valued in perpetuity (because it becomes rather tricky given the riskiness of our industry coupled with the fact that none of us have a crystal ball), so we use year six as our terminal year. The residual value (second, light gray block of the calculation) represents the present day value of cash flow in year six and beyond. The discount factor used for this calculation is 4% lower than your Total Discount Rate.
The sum of the total present value and the residual value equals the DCF valuation (and our eValuation amount).