- CFA Exams
- 2025 Level II
- Topic 5. Equity Valuation
- Learning Module 24. Residual Income Valuation
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Learning Outcome Statements PDF Download
| 1. Calculating Residual Income calculate and interpret residual income, economic value added, and market value added; | |
| 2. Commercial Implementations of the Residual Income Concept calculate and interpret residual income, economic value added, and market value added; | |
| 3. The Residual Income Valuation Model describe 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 Income 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; | |
| 5. Calculating an Implied Growth Rate in Residual Income 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 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 compare 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 Considerations describe accounting issues in applying residual income models. |
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