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 ?
M Rokeach in his work, The Nature of Human Values (1973), classifies values into two broad classes: terminal values and instrumental values.
Terminal values indicate the final results and outcomes of policy-making.
2013), they compute terminal values by assuming perpetual growth, and they obtain an [R.
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.
Terminal values are determined conservatively and across most industries arbitrarily.
Instrumental values (which refers to the values associated with a mode of behavior) and terminal values (which relates to end-states), are related yet are separately organized into relatively enduring hierarchical organizations along a continuum of importance.
Rokeach's model, from which the Rokeach Value Survey (RVS) is derived, is based on two sets of 18 values: terminal values or those end states that a person aspires to, and instrumental values or desired "modes of conduct".
Terminal values are family security, a world at peace, wisdom, salvation, a sense of accomplishment, inner harmony, social recognition, freedom, a world of beauty, true friendship, pleasure, self respect, national security, health, equality, mature love, a comfortable life, an exciting life.
being honest, ambitious) and terminal values refer to an individual's goals in life (e.
One set is called terminal values and the other is called instrumental values.
102) Indeed--and in a striking in stance of internal inconsistency--the Delaware courts have accepted DCF valuations based on terminal values estimated using an exit multiple approach, without making any IMD-type upward adjustment to the terminal value.
If, however, the tax rate at withdrawal increases to 40%, the Roth IRA becomes a more tax efficient investment with the corresponding terminal values of $4,240, $14,121, and $13,035.

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