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Expected Value |
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Definition of Expected ValueExpected ValueThe value of the possible outcomes of a variable weighted by the Expected valueThe weighted average of a probability distribution.
Related Terms:Expected value of perfect informationThe expected value if the future uncertain outcomes could be known total expected value (for a project)the sum of the individual cash flows in a probability distribution multiplied by their related probabilities Insurance principleThe law of averages. The average outcome for many independent trials of an experiment Law of large numbersThe mean of a random sample approaches the mean (expected value) of the MeanThe expected value of a random variable. Mean-variance analysisEvaluation of risky prospects based on the expected value and variance of possible outcomes. Risk-adjusted profitabilityA probability used to determine a "sure" expected value (sometimes called a Stopping curveA curve showing the refunding rates for different points in time at which the expected value Standard DeviationA statistical term that measures the dispersion of a variable VarianceThe weighted average of the squared deviations from the coefficient of variationa measure of risk used when the standard deviations for multiple projects are approximately NPV (net present value of cash flows)Same as PV, but usually includes a subtraction for an initial cash outlay. PV (present value of cash flows)the value in today’s dollars of cash flows that occur in different time periods. Adjusted present value (APV)The net present value analysis of an asset if financed solely by equity Bond valueWith respect to convertible bonds, the value the security would have if it were not convertible Book valueA company's book value is its total assets minus intangible assets and liabilities, such as debt. A Book value per shareThe ratio of stockholder equity to the average number of common shares. Book value Carrying valueBook value. Cash-surrender valueAn amount the insurance company will pay if the policyholder ends a whole life Conversion valueAlso called parity value, the value of a convertible security if it is converted immediately. Exercise valueThe amount of advantage over a current market transaction provided by an in-the-money Expected future cash flowsProjected future cash flows associated with an asset of decision. Expected future returnThe return that is expected to be earned on an asset in the future. Also called the Expected returnThe return expected on a risky asset based on a probability distribution for the possible rates Expected return on investmentThe return one can expect to earn on an investment. See: capital asset Expected return-beta relationshipImplication of the CAPM that security risk premiums will be Extraordinary positive valueA positive net present value. Face valueSee: Par value. Firm's net value of debtTotal firm value minus total firm debt. Future valueThe amount of cash at a specified date in the future that is equivalent in value to a specified Intrinsic value of an optionThe amount by which an option is in-the-money. An option which is not in-themoney Intrinsic value of a firmThe present value of a firm's expected future net cash flows discounted by the Investment valueRelated:straight value. Liquidation valueNet amount that could be realized by selling the assets of a firm after paying the debt. Loan valueThe amount a policyholder may borrow against a whole life insurance policy at the interest rate Market value1) The price at which a security is trading and could presumably be purchased or sold. Market value ratiosRatios that relate the market price of the firm's common stock to selected financial Market value-weighted indexAn index of a group of securities computed by calculating a weighted average Maturity valueRelated: par value. Net adjusted present valueThe adjusted present value minus the initial cost of an investment. Net asset value (NAV)The value of a fund's investments. For a mutual fund, the net asset value per share Net book valueThe current book value of an asset or liability; that is, its original book value net of any Net present value (NPV)The present value of the expected future cash flows minus the cost. Net present value of growth opportunitiesA model valuing a firm in which net present value of new Net present value of future investmentsThe present value of the total sum of NPVs expected to result from Net present value ruleAn investment is worth making if it has a positive NPV. Projects with negative NPVs Net salvage valueThe after-tax net cash flow for terminating the project. Original face valueThe principal amount of the mortgage as of its issue date. Par valueAlso called the maturity value or face value, the amount that the issuer agrees to pay at the maturity date. Parity valueRelated:conversion value Present valueThe amount of cash today that is equivalent in value to a payment, or to a stream of payments, Present value factorFactor used to calculate an estimate of the present value of an amount to be received in Present value of growth opportunities (NPV)Net present value of investments the firm is expected to make Price value of a basis point (PVBP)Also called the dollar value of a basis point, a measure of the change in Relative valueThe attractiveness measured in terms of risk, liquidity, and return of one instrument relative to Replacement valueCurrent cost of replacing the firm's assets. Residual valueUsually refers to the value of a lessor's property at the time the lease expires. Salvage valueScrap value of plant and equipment. Standardized valueAlso called the normal deviate, the distance of one data point from the mean, divided by Straight valueAlso called investment value, the value of a convertible security without the con-version option. Terminal valueThe value of a bond at maturity, typically its par value, or the value of an asset (or an entire Time value of an optionThe portion of an option's premium that is based on the amount of time remaining Time value of moneyThe idea that a dollar today is worth more than a dollar in the future, because the dollar Utility valueThe welfare a given investor assigns to an investment with a particular return and risk. Value-added taxMethod of indirect taxation whereby a tax is levied at each stage of production on the value Value-at-Risk model (VAR)Procedure for estimating the probability of portfolio losses exceeding some Value additivity principalPrevails when the value of a whole group of assets exactly equals the sum of the Value dateIn the market for Eurodollar deposits and foreign exchange, value date refers to the delivery date Value datingRefers to when value or credit is given for funds transferred between banks. Value managerA manager who seeks to buy stocks that are at a discount to their "fair value" and sell them at BOOK VALUEAn asset’s cost basis minus accumulated depreciation. BOOK VALUE OF COMMON STOCKThe theoretical amount per share that each stockholder would receive if a company’s assets were sold on the balance sheet’s date. Book value equals: CAPITAL IN EXCESS OF PAR VALUEWhat a company collected when it sold stock for more than the par value per share. PAR VALUEAn arbitrary value that a company may assign to its stock. Par value has no relationship to what the stock is selling for on the open market. SALVAGE VALUEThe amount management estimates a piece of equipment will be worth at the end of its useful life, either as a trade-in or if it were sold for scrap. Cash value added (CVA)A method of investment appraisal that calculates the ratio of the net present value of an Economic Value Added (EVA)Operating profit, adjusted to remove distortions caused by certain accounting rules, less a charge Net present value (NPV)A discounted cash flow technique used for investment appraisal that calculates the present value of future cash flows and deducts the initial capital investment. Shareholder valueIncreasing the value of the business to its shareholders, achieved through a combination of Value-based managementA variety of approaches that emphasize increasing shareholder value as the primary goal of every business. No par value stockStock issued by the company that does not have an arbitrary value (par value) assigned to it. Par valueAn arbitrary value assigned by the company to each share of stock; it is used in the accounting for the sale of stock and in some jurisdictions for calculating taxes. Stated value stockStock issued by the company that does not have a par value, but does have a stated value. For accounting purposes, stated value is functionally equivalent to par value. book value and book value per shareGenerally speaking, these terms net present value (NPV)Equals the present value (PV) of a capital investment present value (PV)This amount is calculated by discounting the future Book ValueThe value of an asset as carried on the balance sheet of a Book Value per ShareThe book value of a company divided by the number of shares Face ValueThe nominal value of a security. Also called the par value. Future ValueThe amount a given payment, or series of payments, will be worth Liquidation ValueThe net proceeds (after taxes and expenses) of selling the assets Net Present Value (NPV)The present value of all future cash inflows minus the present value Par ValueNominal value of a security. Same as face value. Present Value (PV)The dollar value at the present time (year zero) of a single cash Replacement ValueThe amount necessary to duplicate a company's assets at current Residual ValueThe value attributed to a company to represent all future cash flows approximated net realizable value at split-off allocationa method of allocating joint cost to joint products using a business-value-added activityan activity that is necessary for the operation of the business but for which a customer would not want to pay
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