# Is terminal value the same as salvage value?

Another way to look at the difference

**is terminal value**normally refers to the**value**of an asset or entity at the end of an investment period, while**residual value**, or**salvage value**, normally refers to an asset at the end of its useful life.A.

### What is the 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.#### How do you determine discount rate?

The**discount rate**is the**rate**of return used in a**discounted**cash flow analysis to**determine**the present value of future cash flows. This**rate**of return (r) in the above formula is the**discount rate**.#### What is the enterprise value?

The**Enterprise Value**, or EV for short, is a measure of a company's total**value**, often used as a more comprehensive alternative to equity market capitalization.**Enterprise value**is calculated as the market capitalization plus debt, minority interest and preferred shares, minus total cash and cash equivalents.#### What is the perpetuity growth rate?

The**perpetuity growth rate**is typically between the historical inflation**rate**of 2-3% and the historical GDP**growth rate**of 4-5%. If you assume a**perpetuity growth rate**in excess of 5%, you are basically saying that you expect the company's**growth**to outpace the economy's**growth**forever.

B.

### What is terminal value example?

Definition:

**Terminal value**is the sum of all cash flows from an investment or project beyond a forecast period based on a specified rate of return. In other words, it's the estimated**value**of an asset at maturity adjusted for interest rates and cash flows in today's dollars.#### Why is EV Ebitda used?

The**EV**/**EBITDA**Ratio. The**EV**/**EBITDA**ratio compares a company's enterprise value to its earnings before interest, taxes, depreciation and amortization. Lower ratio values can indicate that a company is currently undervalued.#### How can you have negative equity?

The**negative**amount of owner's**equity**also means that the company's balance sheet**will**report liability amounts greater than the amount of assets. The company could operate under those conditions if its assets are turning to cash before the liabilities**need**to be paid.#### Can you have a negative enterprise value?

When calculating**enterprise value**, cash and cash equivalents are subtracted from the market capitalization plus debt, so it is possible for a company to have a**negative enterprise value**. A company with absolutely no debt could still have a**negative enterprise value**.

C.

### What is the terminal cash flow?

**Terminal cash flow**is the net

**cash flow**that occurs at the end of a project and represents the after-tax proceeds from disposal of the project assets and recoupment of working capital.

**Terminal cash flow**is an important input in the capital budgeting process.

#### What is relevant cash flow for a project?

A definition often used for**relevant cash flows**states that they must be**cash flows**that occur in the future and are incremental.**Cash flow**. While on the face of it obvious, only costs or revenues that give rise to a**cash flow**should be included. Accordingly, for example, depreciation charges should be excluded.#### What is project cash flow statement?

A projected**cash flow statement**is used to**project**and evaluate**cash**inflows and outflows for an economic entity in order to determine when, how much, and for how long**cash**deficits or surpluses will exist for that entity during an upcoming time period.#### What is an exit multiple?

**Exit Multiple**Definition. An**exit multiple**is one of the most commonly used terms in finance and it refers to the terminal**multiple**at which any given project will be exited. The most commonly used**multiple**is EV / EBITDA .

Updated: 28th November 2019