Investment Valuation Model

Investment Valuation Model (IVM)

The basic mathematical technique of finance that calculates the value of an investment as the present value of all future cash flows expected to be generated by the investment.

Investment Valuation Model

A mathematical calculation of the value of an investment. An IVM computes this value as the present value of all returns the investment is likely to generate. This can help in making investment decisions. For example, if a company's share price is $5 and an IVM computes that the present value of returns will be $7 per share, the investment is likely to be profitable. See also: option pricing model.