terminal value

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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.

Terminal Value

1. In accounting, the salvage value.

2. In finance, the present value of future cash flows.

3. In investing, the value of an investment after a given period of time at a given interest rate. The terminal value is calculated in the same way as compound interest.

terminal value

The dollar value of an asset at a specific future time. For example, a $1,000 certificate of deposit that earns an annual return of 9% has a terminal value of $1,539 in five years.

terminal value

The remaining value of property at the end of a certain designated period.

References in periodicals archive ?
Terminal values described conditions or state of existence such as wisdom, equality and salvation.
Null Hypothesis 1: There are no significant generational differences in terminal values between managers and non-managers.
The 18 terminal values were selected through collecting empirical data, literature reviews, and personal reflection.
97) Employee terminal value with capital gain tax (tcg) is $10 * 1-tcg, and with employer gross-up, employee terminal value is $10 * (1-tx)/(1-tc).
Females appear to be less strongly oriented toward personal terminal values than men, but more strongly oriented toward moral means.
Terminal value calculation is used to determine the income flow for years 11 and beyond.
Much of this difference between theory and the survey data can be understood by examining the estimates of terminal value and how the income stream is capitalized.
Based on these numbers, the gross revenue and NPV with terminal value (24) of the project is calculated as shown in appendix 3.
As to the differences between the value orientations of optimists and pessimists, salvation stands out as the most important terminal value for the pessimists.
The terminal value is where the CAP line intersects the X axis.
Key factors that can vary in applying the DCF technique are the discount rates and terminal value calculations.

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