DEFINITION of Ending Market Value (EMV)
The Ending Market Value (EMV) is the value of an investment at the end of the investment period. In private equity, the ending market value, also called the residual value, is the remaining equity that a limited partner has in a fund.
BREAKING DOWN Ending Market Value (EMV)
The ending market value (EMV) is the total value of each various class of securities held in an investment account at the end of the reporting period. For example, an account with a number of investments including stocks, bonds, options, and mutual funds will have the EMV calculated for each type of investment. It can also be referred to as the value of an investment at the time its position is closed out.
The value is calculated by taking the beginning market value and adding the interest earned over the course of the investment.
Ending Market Value = Beginning Market Value x (1 + interest rate)
This is an important equation to consider when choosing an investment as the time value of money (TVM) can be a valuable decision-making variable.
For example, assuming the market value of a security at the beginning of a period is $100,000 and the interest rate during this period is 10%, the EMV can be calculated as:
EMV = $100,000 x (1 + 0.10)
= $100,000 x 1.1
In the case of a portfolio with different types of securities, the EMV can be calculated individually for each category of investments.
EMVstocks = Number of shares x Price
EMVbonds = (Price/100) x Par value x Price factor
EMVoptions = Number of contracts x Price
Within the area of capital budgeting, the ending market value is used to calculate the economic income of an investment, that is, the profit realized from an investment.
Economic Income = Cash flow + (Ending market value – Beginning market value)
Following this equation, the beginning market value (BMV) at the start of a period is equal to the EMV at the end of the previous period. The BMV is based on what both the buyer and seller (effectively, the market), deem the true value of the property to be. Market value is similar to market price given that the market remains efficient and the players are rational.