Professional Documents
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VALUE
Adjusted present value
• Abbreviated APV. The net present value analysis of an asset if financed solely by
equity (present value of un-levered cash flows), plus the present value of any
financing decisions (levered cashflows). In other words, the various tax shields
provided by the deductibility of interest and the benefits of other investment tax
credits are calculated separately. This analysis is often used for highly
leveragedtransactions such as a leverage buy-out.
Assessed value
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Bond value
• With respect to convertible bonds, the value the security would have if it were not
convertible apart from the conversion option.
Book value
• Usually Book Value per Share. Calculated by dividing the net worth of a company
(common stock plus retained earnings) by the number of shares outstanding. This is
the accounting value of a share of stock, the value of the company's assets that a
shareholder would theoretically receive if a company were liquidated.
The book value may have no similarity to the actual cost per share on the stock
market (called market value), or even to the sum of money that the shareholder
would receive if the company dissolved. Companies that are running their
businesses very successfully may sell at many times their book value, while those
doing poorly may sell at a discount to their book value.
Increasing book value generally indicates that the company is accumulating assets
faster than debt - a good sign. Decreasing book value may be due to research and
development expenses, writing down assets, losing money from operations, or
issuing more shares.
• The value at which a debt security is shown on the holder's balance sheet. Book
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value is often acquisition cost + amortization accretion, which may differ markedly
from market value. It can be further defined as "tax book," "accreted book," or
"amortized book" value.
• The amount per share of common stock that would be received if all of the firm's
assets were sold for their exact book (accounting) value and the proceeds remaining
after paying all liabilities (and preferred shares) were divided among the common
shareholders.
• Weights that use accounting values to measure the proportion of each type of
capital in the firm's financial structure; used in calculating the weighted average cost
of capital.
Carrying value
• Book value.
• An amount the insurance company will pay if the policyholder ends a whole life
insurance policy.
• The value of a convertible security measured in terms of the market price of the
common shares into which it can be converted.
Conversion value
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Exercise value
Expected value
• The expected value if the future uncertain outcomes could be known minus the
expected value with no additional information.
Extrinsic value
Face value
• See Par.
Fair value
• Is the disparity between an instrument s trading price and its computed value.
Future value
• The amount of cash at a specified date in the future that is equivalent in value to a
specified sum today.
• Suppose you invest $100 at 10% for 1 year. At the end of one year, you will receive
100 + 0.1 x 100 = (1 + 0.1) x l00 = $110. This amount, $110 is called the future value
of $100 invested at 10% for 1 year.
• The multiplier used to calculate at a specified interest rate, the future value of a
present amount as of a given time.
Amount = (1 + interest rate)-t or, Amount = __1___ (1 + i)t where i is the interest rate
and t is expressed decimally (.05 for 5 percent). Also, t is the time and .5 refers to
1/2 of a year, 2 equals 2 years and 7.75 equals 7 3/4 years.
Amount = 1 -[1/(1+i)t] i where i is the interest rate and t is expressed decimally (.05
for 5 percent). Also, t is the time and .5 refers to 1/2 of a year, 2 equals 2 years and
7.75 equals 7 3/4 years.
Intrinsic value
• Inherent worth.
• The present value of a firm's expected future net cash flows discounted by the
required rate of return.
• The positive difference between the current market price of a firm's common
Investment value
Liquidation value
• Net amount that could be realized by selling the assets of a firm after paying the
debt.
• The actual amount per share that would be received if all of the firm's assets were
sold for their market value, liabilities (and preferred shares) are paid, and any
remaining money were divided among the common shareholders.
Loan value
• The amount a policy holder may borrow against a whole life insurance policy at the
interest rate specified in the policy.
Market value
sold.
• (1) The price at which a security is trading and could presumably be purchased or
sold. (2) The value investors believe a firm is worth; calculated by multiplying the
number of shares outstanding by the current market price of a firm's shares.
• The price at which investors buy or sell a share of common stock or a bond at a
given time. Market value is determined by the interaction between buyers and
• Ratios that relate the market price of the firm's common stock to selected financial
statement items.
• Weights that use market values to measure the proportion of each type of capital in
the firm's financial structure; used in calculating the weighted average cost of capital.
Maturity value
• NAV is the price of a share in a mutual fund or investment company. This price is
calculated once or twice daily. Net asset value is the amount by which the assets'
value exceeds the company's liabilities. It is calculated by adding up the market
value of all securities owned by the company, subtracting the company's liabilities,
and dividing this value by the number of shares of the company outstanding. Thus,
the NAV indicates the current buying or selling price of a share in an investment
company.
• Abbreviated NAV. The value of a Mutual Fund share calculated once a day, based
on the closing market price for each security in the fund's portfolio. It is computed by
deducting the fund's liabilities from the total assets of the portfolio and dividing this
amount by the number of shares outstanding.
• The current book value of an asset or liability; that is, its original book value net of
any accounting adjustments such as depreciation.
• Abbreviated NPV. The present value of the expected future cash flows minus the
cost.
• NPV shows the change in wealth as a result of taking a project. NPV is computed
as the discounted cash flows. To maximize wealth, take all projects with positive
NPV and reject all projects with negative NPV.
• The present value of the total sum of NPVs expected to result from all of the firm's
future investments.
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• A model valuing a firm in which net present value of new investment opportunities
is explicitly examined.
• A table and/or graph that shows the net present value for a project at various
discount rates.
Par value
• Also called the maturity value or face value, the amount that the issuer agrees to
pay at the maturity date.
• Is the accounting term for the capitalization of the equity. It is usually arbitrary.
Parity value
Present value
• The current dollar value of a future amount. The amount of money that would have
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to be invested today at a given interest rate over a specified period to equal the
future amount.
• Suppose you wish to receive $110 one year from now. How much must you invest
today at 10%? We already know the answer: $100. $100 is called the present value
of $110 at 10%.
• The multiplier used to calculate at a specified discount rate the present value of an
amount to be received in a future period.
• (NPV) Net present value of investments the firm is expected to make in the future.
• Abbreviated PVBP. Also called the dollar value of a basis point, a measure of the
change in the price of the bond if the required yield changes by one basis point.
Relative value
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• The attractiveness measured in terms of risk, liquidity, and return of one instrument
relative to another, or for a given instrument, of one maturity relative to another.
• The ratio of the current PE to the five-year Average PE. It measures whether the
current value of the stock is less or more than the average value that investors were
willing to pay during the last five years.
The current PE is affected by current price and earnings. The average PE depends
upon any changes made to average high and low PEs. Attractively valued stocks
have a relative value of one or less. A range of about 0.75 to 1.10 may be
• Is the comparative analysis between two or more assets. It is also a form of spread
trading.
• The attractiveness measured in terms of risk, liquidity, and return of one instrument
relative to another, or for a given instrument, of one maturity relative to another.
Replacement value
Residual value
• Usually refers to the value of a lessor's property at the time the lease expires.
Salvage value
• The net amount received after tax when a project is terminated and an asset is
sold.
• Is the amount remaining after a depreciated useful life. It refers to the residual or
recoverable value of a depreciated asset. It should be noted that the gross salvage
value may be adjusted by a removal or disposal cost. This adjustment would lower
the gross salvage value.
Standardized value
• Also called the normal deviate, the distance of one data point from the mean,
divided by the standard deviation of the distribution.
Stated value
• The value of of the preferred share on the issue date. Ususally $10, $20, $25, $50
or $100. Preferred shares receive a dividend that is based on the state value and it
is constant as long as the preferred share remains outstanding.
• The price at which a convertible bond would sell in the market without the
conversion feature.
Straight value
• Also called investment value, the value of a convertible security without the con-
version option.
Surrender value
Terminal value
• The value of a bond at maturity, typically its par value, or the value of an asset (or
an entire firm) on some specified future valuation date.
Time value
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• Has two general meanings. The first is the value or amount of a sum of money
adjusted by an interest rate for a given time period. The second common usage is in
the context of options. Here, it defines the amount of premium attributed to the
remaining term of the option after factoring out any in-the money component. Is
multiplicative factor which is dependent on the time remaining to expiration and the
attendant volatility. However, time value is not proportional but tends to more nearly
approximate a square root function.
• The idea that a dollar today is worth more than a dollar in the future, because the
dollar received today can earn interest up until the time the future dollar is received.
Undervalued
• A stock selling below the liquidation value or the market value that analysts believe
it deserves. Fundamental Analysts try to spot such companies to buy them before
they become fully valued. For example, a stock may be undervalued because the
industry is out of favor, or because the company is not well known or has an erratic
history of earnings.
Unit value
• (1) In terms of Mutual Funds, members buy shares of the fund that are worth a
specified amount the unit value and that amount changes proportionally with the
success or failure of the stocks in the mutual fund. This ensures that each member's
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share in the success or failure of the stocks is proportionate to their investment. (2)
In terms of Invesment Clubs, a method of distributing earnings or sharing in losses,
proportional to members investment, is to designate a unit value that allows
members to choose how much they wish to invest. Each unit value is proportionally
affected by the success or failure of the club's chosen stocks. This way, members
can invest different amounts in the club without having to share equally in the
earnings or losses.
Utility value
• Prevails when the value of a whole group of assets exactly equals the sum of the
values of the individual assets that make up the group of assets. Stated differently,
the principle that the net present value of a set of independent projects is just the
sum of the net present values of the individual projects.
Value at risk
Value date
• In the market for Eurodollar deposits and foreign exchange, value date refers to the
delivery date of funds traded. Normally it is on spot transactions two days after a
transaction is agreed upon and the future date in the case of a forward foreign-
exchange trade.
• In the market for Eurodollar deposits and foreign exchange, value date refers to the
delivery date of funds traded. Normally it is on spot transactions two days after a
Value dating
• A procedure used by non-U.S. banks to delay, often for days or even weeks, the
availability of funds deposited with them.
• Refers to when value or credit is given for funds transferred between banks.
• A fund that invests in stocks with prices that are below average in relation to their
current earnings because they are considered to have below-average growth
prospects.
Value funds
• A ranking assigned by the Value Line Investment Survey which rates companies in
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Value manager