terminal value

• Terminal Value

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Fold (higher-order function)

1 Folds are in a sense dual to Unfold (higher-order function)|unfolds, which take a seed value and apply a function corecursion|corecursively to

decide how to progressively construct a corecursive data structure, whereas a fold

recursively breaks that structure down, replacing it with the results of applying a

combining function at each node on its Terminal and nonterminal symbols|terminal values and

the recursive results (catamorphism as opposed to anamorphism of unfolds).


Arthur Samuel - Computer checkers (draughts) development

1 In what he called rote learning, the program remembered every position it had already seen, along with the

terminal value of the reward function


Intrinsic value (ethics) - Other names

1 Other names for intrinsic value are 'terminal value', 'essential value',

'principle value' or 'ultimate importance'.


Perth Airport - Intrastate terminal: T2

1 Construction commenced during late 2011, with combined works to deliver

the new terminal valued at $120 million (2010). This will significantly

reduce activity in the domestic precinct, further improving the

experience for Qantas and Virgin Australia customers and facilitating continued growth for these airlines.


Terminal value (finance)

1 In finance, the 'terminal value' (continuing value or horizon value) of

a Security (finance)|security is the present value at a future point in

time of all future cash flows when we expect stable growth rate forever


Terminal value (finance)

1 Thus, the terminal value allows for the inclusion of the value of future cash flows

occurring beyond a several-year projection period while satisfactorily mitigating many of the problems of valuing such cash flows. The

terminal value is calculated in accordance with a stream of projected future free cash flows in discounted cash flow analysis. For

whole-company Valuation (finance)|valuation purposes, there are two methodologies used

to calculate the Terminal Value.


Terminal value (finance) - Perpetuity Growth Model

1 To determine the present value of the terminal value, one must discount the

Terminal Value at T0 by a factor equal to the number of years included in the initial

projection period. If N is the 5th and final year in this period, then the Terminal Value is divided by (1 + k)5. The Present Value of the Terminal Value is then added to the PV

of the free cash flows in the projection period to arrive at an implied enterprise

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Terminal value (finance) - Perpetuity Growth Model

1 If the growth rate in perpetuity is not constant, a multiple-stage terminal

value is calculated. The terminal growth rate can be negative, if the company in question is assumed to

disappear in the future.


Terminal value (finance) - Exit Multiple Approach

1 The Present Value of the Terminal Value is then added to the PV of the

free cash flows in the projection period to arrive at an implied

Enterprise Value


Terminal value (finance) - Comparison of Methodologies

1 Such analytics result in a terminal value based on operating statistics

present in a proven market for similar transactions


Terminal value (finance) - Comparison of Methodologies

1 In practice, academics tend to use the Perpetuity Growth Model, while investment bankers favor the Exit Multiple approach.

Ultimately, these methods are two different ways of saying the same thing. For both terminal value approaches, it is essential to use a range of appropriate

discount rates, exit multiples and perpetuity growth rates in order to

establish a functional valuation range.


Residual income valuation - Valuation formula

1 Then, assuming long-run, constant, growth g from year m, the terminal value is


Residual income valuation - Comparison with other valuation methods

1 Further, value is recognized earlier under the RI approach, since a large part of the stock's intrinsic value is recognized immediately - current

book value per share - and residual income valuations are thus less

sensitive to terminal value


Adjusted present value - APV formula

1 APV = Unlevered NPV of Free Cash Flows and assumed Terminal Value +

NPV of Interest Tax Shield and assumed Terminal Value


Adjusted present value - APV formula

1 + PV of terminal value


Camera Link - Transmission protocol

1 the data counter has reached its terminal value.


Perpetuities

1 The concept is closely linked to Terminal value (finance)|terminal value and terminal growth rate in

Valuation (finance)|valuation.


Time-weighted return - Internal Rate of Return

1 One of these methods is the internal rate of return. Like the true time-weighted return method, the internal rate of return is also

based on a compounding principle. It is the discount rate that will set the net present

value of all external flows and the terminal value equal to the value of the initial

investment. However, solving the equation to find an estimate of the internal rate of

return generally requires an iterative numerical method.


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