Horizon Value Calculator

To calculate the horizon value (HV), divide the annual cash flow (ACF) by the difference between the required rate of return (RR) and the growth rate (GR).

Horizon Value Calculator

Enter any 3 values to calculate the missing variable

Annual Cash Flow ($) Required Return (%) Growth Rate (%) Horizon Value ($)

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The Horizon Value Calculator is a financial tool used to estimate the value of an investment or project at a specific future point, known as the horizon date. This calculation is crucial in discounted cash flow (DCF) models, as it accounts for the value beyond the forecast period. It is widely applied in stock valuation, corporate finance, and investment analysis.

Formula:

$HV = \frac{ACF}{RR – GR}$

Variable	Description	Unit
$HV$	Horizon value	Currency (e.g., USD)
$ACF$	Annual cash flow at the horizon date	Currency
$RR$	Required rate of return	Percentage (%)
$GR$	Perpetual growth rate	Percentage (%)

Solved Calculations:

Example 1: Calculate Horizon Value for a Company

Step	Value	Explanation
Annual Cash Flow ($ACF$)	$500,000 \, \text{USD}$	Future annual cash flow
Required Rate of Return ($RR$)	$10\%$	Investor’s desired return rate
Growth Rate ($GR$)	$3\%$	Perpetual growth rate
Calculation	$HV = \frac{500,000}{0.10 – 0.03}$	Substitute into formula
Result	$HV = 7,142,857 \, \text{USD}$	Horizon value

 

Example 2: Calculate Horizon Value with Different Parameters

Step	Value	Explanation
Annual Cash Flow ($ACF$)	$200,000 \, \text{USD}$	Future annual cash flow
Required Rate of Return ($RR$)	$12\%$	Investor’s desired return rate
Growth Rate ($GR$)	$4\%$	Perpetual growth rate
Calculation	$HV = \frac{200,000}{0.12 – 0.04}$	Substitute into formula
Result	$HV = 2,500,000 \, \text{USD}$	Horizon value

What is the Horizon Value Calculator?

The Horizon Value Calculator is a specialized financial tool which is used to estimate the value of an investment or asset at a specific point in the future, typically beyond the projection period.

Often referred to as the terminal value, this concept is essential in discounted cash flow (DCF) analysis, helping investors and analysts gauge the long-term potential of an asset or business.

To use the calculator, input variables such as cash flows, growth rates, and the discount rate. The tool applies standard formulas like the perpetuity growth formula or the exit multiple approach to compute the horizon value.

For example, it can determine the future value of a stock or project using perpetuity growth assumptions or calculate terminal values for DCF analysis.

This calculator is beneficial for answering queries like how to calculate horizon value in Excel, understanding the horizon value of a stock, or exploring related concepts like intrinsic value and growth rates.

It is particularly useful in finance, where decisions rely on forecasting the value of investments over extended periods.

Whether you are assessing an investment, calculating terminal returns, or analyzing financial models, the Horizon Value Calculator simplifies complex computations, providing accurate and actionable results.

Final Words:

In essence, the Horizon Value Calculator is an indispensable resource for financial analysis. It enables users to forecast future asset values accurately, aiding in investment decisions and long-term planning.