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Authors
Advisor(s)
Abstract(s)
The uncertainty about the future of firms must be modeled and incorporated in the valuation of enterprises outside
the explicit period of analysis, i.e., in the continuing or terminal value (TV). There is a multiplicity of factors that
influence the TV of firms which are not being considered within current evaluation models. This aspect leads to the
incurring of unrecoverable errors, thus leading to values of goodwill or bad will far away from the substantial value
of intrinsic assets. As a consequence, the evaluation results will be presented markedly different from market values.
There is no consensus in the scientific community about the method of computation of the TV as a forecast in an
infinite horizon. The size of the terminal, or non-explicit period, assumed as infinite, is never called into question by
scientific literature, or the probability of business bankruptcy. This paper aims to promote a study of the existing
literature on the TV, to highlight the fragility of the evaluation models of companies that have been used by the
academic community and by financial analysts, and to point out lines for future research to minimize these errors.
Description
Keywords
Continuing value (CV) Rerminal value (TV) Perpetuity Life expectancy
Citation
Reis e Augusto (2013)
Publisher
David Publishing