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 ?
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).
The second method used by the appraisal court and by finance experts in calculating the terminal value is the comparable compan method.
In Equation (2), the terminal value is composed of the evolution of a = [E.
Another claimed RIM advantage is that the terminal value is measured as the difference between the market value and the book value of the firm's equity, [V.
We then compared the terminal value of the firm to the wealth that would have been created had the firm been sold at time 0 and the proceeds invested in the benchmark portfolio.
According to the typology, Effective Crusaders score high on competence instrumental values and social terminal terminal values.
In Figure 7, the same relationship to earnings is apparent, while cash affects the effect of advertising on firm value once more via the probability that there will be some terminal value in the firm, given that its value for all Cs not greater than zero, is zero.
Present-value net income is the current value of future net income for each of the 10 years plus the terminal value.
Define L(S) as the amount of the casualty loss or the reduction in the terminal value of the firm conditional on state S.
In biotechnology, since the exits for investors typically occur post-acquisition (and companies are more often acquired after they have been traded publicly), the investors will use the prevailing "mood" and values at acquisition as a basis of terminal value.
The study explains several disparities in the methodology used to estimate terminal value and define income stream that account for much of the gap between theory and secondary market data in the form of investor surveys.
Terminal value of Account at Age 65 (Traditional or ROTH IRA) Starting Ending Investment Age Age Period (in years 15 65 50 25 65 40 35 65 30 45 65 20 55 65 10 Terminal value of Account at Age 65 (Traditional or ROTH IRA) Rate of Return for Investment Period Starting Inflation US Treasury Long-term Age Bills Corporate Bonds 3.

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