Terminal Value Definition & Application Wiki

Terminal Value Definition & Application Wiki

Last Updated by WikiWealth

Short Definition

TV = Terminal Value

In finance, the terminal value (continuing value or horizon value) of a security is the present value at a future point in time of all future cash flows when we expect stable growth rate forever. It is most often used in multi-stage discounted cash flow analysis, and allows for the limitation of cash flow projections to a several-year period. Forecasting results beyond such a period is impractical and exposes such projections to a variety of risks limiting their validity, primarily the great uncertainty involved in predicting industry and macroeconomic conditions beyond a few years.

Long Definition

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Source: http://en.wikipedia.org/wiki/Terminal_value_(finance)