Ending Market Value – EMV

What Is Ending Market Value – EMV?

In stock investing, ending market value (EMV) signifies the value of an investment at the end of an investment period. In private equity, ending market value (also called the residual value) is the remaining equity that a limited partner has in a fund.

In accounting, a company's investments are reported as assets on its balance sheet. At the end of an accounting period, an accountant "marks" the securities to their current market price to arrive at the ending market value of the securities. The updated value is reported on the company's financial statements by increasing or decreasing its investment account balance to record the positive or negative change in the securities' market value over the period.

The Formula for EMV Is

E M V = B M V × ( 1 + r ) where: B M V = Beginning market value \begin{aligned} &EMV=BMV\times(1+r)\\ &\textbf{where:}\\ &BMV = \text{Beginning market value}\\ &r = \text{Interest rate} \end{aligned} EMV=BMV×(1+r)where:BMV=Beginning market value

How to Calculate the EMV

The ending market value is calculated by taking an asset's beginning market value and adding the interest earned over the investing time period.

What Does the EMV Tell You?

Ending market value (EMV) is the total value of each various class of securities held in an investment account at the end of the reporting period. For example, an account with a number of investments including stocks, bonds, options, and mutual funds will have the EMV calculated for each type of investment. It can also be referred to as the value of an investment at the time its position is closed out.

Example of How to Use EMV

For example, assuming the market value of a security at the beginning of a period is $100,000 and the interest rate during this period is 10%, the EMV can be calculated as:

E M V = $ 1 0 0 , 0 0 0 × ( 1 + 0 . 1 0 ) = $ 1 0 0 , 0 0 0 × 1 . 1 \begin{aligned} &EMV = \$100,000 \times (1 + 0.10)\\ &= \$100,000 \times 1.1\\ &= \$110,000 \end{aligned} EMV=$100,000×(1+0.10)=$100,000×1.1

In the case of a portfolio with different types of securities, the EMV can be calculated individually for each category of investments.

E M V Stocks = Number of Shares × Price E M V Bonds = (Price / 100) × Par Value × Price Factor \begin{aligned} &EMV_{\text{Stocks}} = \text{Number of Shares} \times\text{Price}\\ &EMV_{\text{Bonds}} = \text{(Price / 100)} \times\text{Par Value} \times\text{Price Factor}\\ &EMV_{\text{Options}} = \text{Number of Contracts} \times\text{Price} \end{aligned} EMVStocks=Number of Shares×PriceEMVBonds=(Price / 100)×Par Value×Price Factor

Within the area of capital budgeting, the ending market value is used to calculate the economic income of an investment, that is, the profit realized from an investment:

Economic Income = Cash Flow + (EMV − BMV) \text{Economic Income} = \text{Cash Flow} + \text{(EMV} - \text{BMV)} Economic Income=Cash Flow+(EMV−BMV)

Following this equation, the beginning market value (BMV) at the start of a period is equal to the EMV at the end of the previous period. The BMV is based on what both the buyer and seller (effectively, the market), deem the true value of the property to be. Market value is similar to market price given that the market remains efficient and the players are rational.