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Calculating Future Residual Income

November 3, 2015

Residual Income model breaks intrinsic value Vo of equity into two components:

  1. Current book value of equity Bo
  2. Present value of expected future RIt

Residual Income

RIt = Et – (r * Bt-1)

RIt = EPSt – (r * Bt-1)

RIt = (ROEt – r) * Bt-1

 

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From → Asset Valuation

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