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AnalystNotes specializes in helping candidates pass. Period.

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**Basic Question 1 of 2**

A company's current BVPS is $50. Consensus EPS estimates for the next two years are $6 and $8. After the second year residual income is expected to be equal to year 2's economic profits indefinitely. The required rate of return on equity is 10%. It is not expected to pay dividends. The company's intrinsic value per share is ______.

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**User Contributed Comments**
2

User |
Comment |
---|---|

ssradja |
Don't forget that BV goes up by EPS - D |

quanttrader |
last term is PV of RI perpetuity |

I passed! I did not get a chance to tell you before the exam - but your site was excellent. I will definitely take it next year for Level II.

#### Tamara Schultz

**Learning Outcome Statements**

explain continuing residual income and justify an estimate of continuing residual income at the forecast horizon, given company and industry prospects;

*CFA® 2024 Level II Curriculum, Volume 4, Module 26.*