- CFA Exams
- 2023 Level II
- Topic 5. Equity Valuation
- Learning Module 26. Residual Income Valuation

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##### Learning Outcome Statements PDF Download

1. Calculating Residual Incomecalculate and interpret residual income, economic value added, and market value added; | |

2. Commercial Implementations of the Residual Income Conceptcalculate and interpret residual income, economic value added, and market value added; | |

3. The Residual Income Valuation Modeldescribe the uses of residual income models;calculate the intrinsic value of a common stock using the residual income model and compare value recognition in residual income and other present value models; | |

4. Fundamental Determinants of Residual Incomeexplain fundamental determinants of residual income;explain the relation between residual income valuation and the justified price-to-book ratio based on forecasted fundamentals; calculate and interpret the intrinsic value of a common stock using single-stage (constant-growth) and multistage residual income models; | |

5. Calculating an Implied Growth Rate in Residual Incomecalculate the implied growth rate in residual income, given the market price-to-book ratio and an estimate of the required rate of return on equity; | |

6. Multistage Residual Income Valuationexplain continuing residual income and justify an estimate of continuing residual income at the forecast horizon, given company and industry prospects; | |

7. Residual Income Valuation in Relation to other Approachescompare residual income models to dividend discount and free cash flow models;explain strengths and weaknesses of residual income models and justify the selection of a residual income model to value a company's common stock; | |

8. Accounting and International Considerationsdescribe accounting issues in applying residual income models. |

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