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Basic Question 3 of 3
The fundamental determinants of residual income are:
II. P/E.
III. The present value of future profits.
IV. Book value of equity.
V. Terminal value.
I. P/B.
II. P/E.
III. The present value of future profits.
IV. Book value of equity.
V. Terminal value.
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Learning Outcome Statements
explain 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;
CFA® 2025 Level II Curriculum, Volume 4, Module 24.