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.

Investopedia explains '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.



comments powered by Disqus
Hot Definitions
  1. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the acquiring company will make an offer for the outstanding shares.
  2. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by additional investment would not warrant the expense. A harvest strategy is employed when a line of business is considered to be a cash cow, meaning that the brand is mature and is unlikely to grow if more investment is added.
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will be executed at a specified price (or better) after a given stop price has been reached. Once the stop price is reached, the stop-limit order becomes a limit order to buy (or sell) at the limit price or better.
  4. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The principle states that, for many phenomena, 20% of invested input is responsible for 80% of the results obtained. Put another way, 80% of consequences stem from 20% of the causes.
  5. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The principle states that, for many phenomena, 20% of invested input is responsible for 80% of the results obtained. Put another way, 80% of consequences stem from 20% of the causes.
  6. Budget Deficit

    A status of financial health in which expenditures exceed revenue. The term "budget deficit" is most commonly used to refer to government spending rather than business or individual spending. When referring to accrued federal government deficits, the term "national debt” is used.
Trading Center