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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

terminal value

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

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.
References in periodicals archive ?
Terminal values concern desirable end-states (such as freedom, inner harmony or national security) while instrumental values express modes of conduct or virtues (ambitious, honest, polite) [1,2].
Terminal values defined as major values of the existence of every man and
As far as we know, there are very few mathematicians involved in the terminal values problems of q-difference equations.
M Rokeach in his work, The Nature of Human Values (1973), classifies values into two broad classes: terminal values and instrumental values.
The main contribution of this paper is to develop a new dividend model with terminal values or bailouts, in which bankruptcy is not terminal.
(6,26,27) Values are of different classification including terminal values. Values-based policies are contingent on terminal values.
Escalation could only occur at terminal values of $80 and $95, and no difference was expected to occur in the $5, $20, and $50 conditions.
(2013), they compute terminal values by assuming perpetual growth, and they obtain an [R.sup.2] of .71 in their regression of stock price on their intrinsic value estimates.
Terminal constraints are set as restrictions on the vehicle's position, angle, and velocity as per the requirements for TAEM, where terms with the superscript "d" denote desired values and those with subscript "f" represent actual terminal values:
To achieve this, a state variable needs to be identified or function of several state variables, whose initial and terminal values are known and whose time rate of change does not change sign (or become zero) along the optimal trajectory.
Indeed, most commentators appear not to have the financial expertise to understand how the low (usually negative) returns from a racing career can be swamped on the upside by these potential 'terminal values'.
The standard approach to estimating the terminal value of the debt and equity assumes the firm reaches a steady state by the terminal date, and computes the terminal values as a FCF perpetuity growing at a constant g, [E.sub.0] [[FCF.sub.T] (1 + g)]/([r.sub.WACC] - g).

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