Loading...
CFA Level 2
Equity Investments

Residual Income Calculation

Very Easy Equity Valuation Applications Residual Income Valuation

Consider a company that has produced a net income of $500,000 for the last year. The company has a book value of equity equal to $3,000,000. After analyzing the company's projected growth in earnings and considering its cost of equity, you believe the required rate of return for the company is 10%.

Using the Residual Income Valuation model, what is the residual income for the company?

Hint

Submitted6.2K
Correct4.2K
% Correct68%