What is a 'Terminal Value  TV'
A terminal value (TV) is the value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as interest rates and the current value of the asset, and assuming a stable growth rate. In addition to bond and asset applications, terminal value can also refer to the value of an entire company at a specified future valuation date. Two common approaches are used to evaluate the terminal value of an asset: the "perpetuity growth model" and the "exit approach."
Also called continuing value or horizon value.
BREAKING DOWN 'Terminal Value  TV'
The terminal value of an asset is its anticipated value on a certain date in the future. It is used in multistage discounted cash flow analysis and the study of cash flow projections for a severalyear period. The perpetuity growth model is used to identify ongoing free cash flows. The exit or terminal multiple approach assumes the asset will be sold at the end of a specified time period, helping investors evaluate risk/reward scenarios for the asset. A commonly used value is enterprise value/EBITDA (earnings before interest, tax, depreciation and amortization) or EV/EBITDA. An asset's terminal value is a projection that is useful in budget planning, and also in evaluating the potential gain of an investment over a specified time period.

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When and why should the terminal value be discounted?
Find out why investors use the terminal value, why the terminal value is discounted to the present day, and how it's related ... Read Answer >> 
When evaluating terminal value, should I use the perpetuity growth model or the exit ...
Examine the important calculation of a terminal value in discounted cash flow analysis, and learn which method of calculating ... Read Answer >> 
What can cause the terminal growth rate to be negative?
Learn about the assumptions built into terminal valuations and in what circumstances the applied terminal growth rate might ... Read Answer >> 
What is the difference between terminal value and residual value?
Read a brief overview of residual value and terminal value, two nearidentical terms that refer to the future value of a ... Read Answer >> 
How is perpetuity used in determining the intrinsic value of a stock?
Learn about the basics of a perpetuity, its valuation, how it is calculated and how it is used when evaluating the intrinsic ... Read Answer >> 
How can an investor terminate a derivative contract?
Read a brief overview about some of the different ways that derivatives traders can terminate their contracts early, including ... Read Answer >>