Calculated Intangible Value - CIV


DEFINITION of 'Calculated Intangible Value - CIV'

A method of valuing a company's intangible assets. This calculation attempts to allocate a fixed value to intangible assets that does not change according to the company's market value. Examples of intangible assets include brand equity and proprietary technology.

BREAKING DOWN 'Calculated Intangible Value - CIV'

Usually a company's intangible assets are valued by subtracting a firm's book value from its market value. However, opponents of this method argue that because market value constantly changes, the value of intangible assets changes also, making it an inferior measure. Finding a company's CIV involves seven steps:

1. Calculate the average pretax earnings for the past three years.
2. Calculate the average year-end tangible assets for the past three years.
3. Calculate the company's return on assets (ROA).
4. Calculate the industry average ROA for the same three-year period as in Step 2.
5. Calculate excess ROA by multiplying the industry average ROA by the average tangible assets calculated in Step 2. Subtract the excess return from the pretax earnings from Step 1.
6. Calculate the three-year average corporate tax rate and multiply by the excess return. Deduct the result from the excess return.
7. Calculate the net present value of the after-tax excess return. Use the company's cost of capital as a discount rate.

  1. Market Value

    The price an asset would fetch in the marketplace. Market value ...
  2. Nonmonetary Assets

    Assets in which the right to receive a fixed or determinable ...
  3. Intangible Asset

    An asset that is not physical in nature. Corporate intellectual ...
  4. Book Value

    1. The value at which an asset is carried on a balance sheet. ...
  5. Brand Equity

    The value premium that a company realizes from a product with ...
  6. Tangible Asset

    Assets that have a physical form. Tangible assets include both ...
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