- CFA Exams
- Level II 2021
- Study Session 11. Equity Valuation (3)
- Reading 30. Residual Income Valuation
Seeing is believing!
Before you order, simply sign up for a free user account and in seconds you'll be experiencing the best in CFA exam preparation.
Learning Outcome Statements PDF Download
1. Calculating residual income a. calculate and interpret residual income, economic value added, and market value added; | |
2. Commercial implementations of the residual income concept a. calculate and interpret residual income, economic value added, and market value added; | |
3. The residual income valuation model b. describe the uses of residual income models; c. 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 income d. explain fundamental determinants of residual income; e. explain the relation between residual income valuation and the justified price-to-book ratio based on forecasted fundamentals; f. 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 income g. calculate 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 valuation h. explain 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 approaches i. compare residual income models to dividend discount and free cash flow models; j. 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 considerations k. describe accounting issues in applying residual income models; l. evaluate whether a stock is overvalued, fairly valued, or undervalued based on a residual income model. |
I was very pleased with your notes and question bank. I especially like the mock exams because it helped to pull everything together.
Martin Rockenfeldt
My Own Flashcard
Add