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Summary form only given. This paper presents a source concept capable of generating high power in the terahertz (THz) range. The source utilizes a Smith-Purcell-type interaction between an annular electron beam and a cylindrical grating. The Smith-Purcell interaction has long been explored for generation of high frequency rf. Two problem areas have been discrepancies in expected and observed spectra and low output power. Recent research  has shown the grating dispersion lies below the Smith-Purcell range and, hence, cannot directly radiate at Smith-Purcell frequencies. The observed grating radiation is thought to be caused by end-effects and harmonics resulting from beam-rf nonlinearities. Recent simulations and experiments [2,3] support this interpretation. The low output power is a result of the exponential decay of the electric field away from the grating surface. This surface-mode characteristic requires electron beams to be thin and close to the grating to interact efficiently. Hence, standard pencil beams are ill suited for power generation while sheet beams present generation and focusing problems. The power limitation can be overcome with an annular electron beam propagating near a cylindrical grating. Annular beams are compatible with standard electron gun design and magnetic focusing techniques. Parametric studies of this THz source configuration were conducted with the electromagnetic PIC code MAGIC. Simulations explored the dependence of frequency and power output on grating geometry, beam current, voltage, magnetic field, tuning bandwidth, harmonic generation and controlled feedback. The beam-grating interaction leads to strong beam bunching and significant high-frequency rf power. Simulation results indicate a compact device could generate tens to hundreds of watts from 0.1 to 3 THz. In contrast to other beam-based sources in this frequency rang, the cylindrical configuration showed rf growth at beam current densities as low as 50 A/cm2. Study resu- ts will be reported along with a discussion of limitations in the simulations and some practical design issues.