terminal value

terminal value
The value of a bond at maturity, typically its par value, or the value of an asset (or an entire firm) on some specified future valuation date. Usually, a perpetuity formula is used. For example, suppose we forecast cash flows through year 10. We make an assumption that year 11 and beyond will be no growth (except for inflation). If the cash flow forecast for year 11 is 100, the firm's discount rate is 12%, and inflation is expected to be 2%, we use the formula V10 = CF11/(disc rate-inflation). Hence, the value is 100/(0.12 - 0.02) that is 1,000. This cash flow needs to be brought back to present value using the formula 1000/(1.12)10, which is 321.97. Note the importance of the inflation assumption. Bloomberg Financial Dictionary

* * *

   The assumed value of a business at the end of a forecasting period, usually after 10 years of projected earnings.

Financial and business terms. 2012.

Игры ⚽ Нужен реферат?

Look at other dictionaries:

  • Terminal value — can mean several things:*In accounting, terminal value refers to the salvage or residual value of an asset. *In computer science, terminal value refers to the character(s) that signify the end of a line. *In finance, terminal value is the future… …   Wikipedia

  • Terminal Value - TV — The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as interest rates and the current value of the asset, and assuming a stable growth rate. In addition to bond and asset… …   Investment dictionary

  • terminal value — future value (or terminal value) The value at some future point in time of a present amount of money, or a series of payments, evaluated at the appropriate interest (growth) rate …   Black's law dictionary

  • terminal value — future value (or terminal value) The value at some future point in time of a present amount of money, or a series of payments, evaluated at the appropriate interest (growth) rate …   Black's law dictionary

  • terminal value — tęstinė vertė statusas T sritis turto vertinimas apibrėžtis Turto vertė laikotarpio, per kurį atliekant diskontuotų pinigų srautų analizę yra prognozuojami pinigų srautai, pabaigoje. atitikmenys: angl. terminal value ryšiai: susijęs terminas –… …   Lithuanian dictionary (lietuvių žodynas)

  • Terminal value (finance) — This article is about finance concept. For other uses, see Terminal value (disambiguation). In finance, the terminal value (continuing value or horizon value) of a security is the present value at a future point in time of all future cash flows… …   Wikipedia

  • Terminal value (computer science) — For other meanings of the term terminal value, see the Terminal value disambiguation page. In computer science, a terminal value is a string or character representing the end. eg, a terminal value is introduced when one hits the enter key in… …   Wikipedia

  • Terminal value — The value of a bond at maturity, typically its par value, or the value of an asset (or an entire firm) on some specified future valuation date. The New York Times Financial Glossary * * *    The assumed value of a business at the end of a… …   Financial and business terms

  • terminal value — TV The value of an investment at the end of an investment period taking into account a specified rate of interest over the period. The formula is the same as that for compound interest, i.e. TV = P(1 + r)t , where TV is the final amount at the… …   Accounting dictionary

  • terminal value — TV The value of an investment at the end of an investment period taking into account a specified rate of interest over the period. The formula is the same as that for compound interest, i. e. TV = P(1 + r)t, where TV is the final amount at the… …   Big dictionary of business and management

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”