Published Online: Apr 12, 2014
Page range: 44 - 50
DOI: https://doi.org/10.2478/remav-2014-0006
Keywords
© 2014
This article is distributed under the terms of the Creative Commons Attribution Non-Commercial License, which permits unrestricted non-commercial use, distribution, and reproduction in any medium, provided the original work is properly cited.
The construction of residual value is a key element of income methods in asset valuation. Its main task is to include asset value at the end of the forecasted cash flow period. Although it is common to apply simplified models of residual value in valuation practice, its meaning in shaping the final outcome is substantial. The aim of the article is to emphasize the role of using an appropriate formula in determining residual value in the valuation process. Moreover, alternative methods of estimating residual value will be presented together with scenarios of applying them.