1.Assuming that the growth rate is less than the required rate of return (r), a decrease in initial book value will cause value in a residual income (RI) model to:

A)   increase.

B)   decrease.

C)   remain the same.

D)   there is insufficient information to determine the effect on RI.

2．Among the various price multiples, the residual income model is most closely linked to which of the following?

A)   Price to earnings (P/E).

B)   Price to sales (P/S).

C)   Price to free cash flow (P/FCF).

D)   Price to book value (P/B).

3．In a single-stage residual income model for a firm with return on equity (ROE) greater than the required rate of return, which statement is least accurate?

A)   The justified price-to-book value (P/B) ratio will be greater than one.

B)   Free cash flow to equity will be positive.

C)   The present value of residual income will be positive.

D)   Market value will be greater than book value.

答案和详解如下：

1.Assuming that the growth rate is less than the required rate of return (r), a decrease in initial book value will cause value in a residual income (RI) model to:

A)   increase.

B)   decrease.

C)   remain the same.

D)   there is insufficient information to determine the effect on RI.

The correct answer was B)

A decrease (increase) in initial book value decreases (increases) value. This is revealed by the RI valuation expression:

V₀ = B₀ + [(ROE – r)/(r – g)]B₀

2．Among the various price multiples, the residual income model is most closely linked to which of the following?

A)   Price to earnings (P/E).

B)   Price to sales (P/S).

C)   Price to free cash flow (P/FCF).

D)   Price to book value (P/B).

The correct answer was D)

The residual income model is most closely linked to P/B because justified P/B is directly linked to expected residual future income.

3．In a single-stage residual income model for a firm with return on equity (ROE) greater than the required rate of return, which statement is least accurate?

A)   The justified price-to-book value (P/B) ratio will be greater than one.

B)   Free cash flow to equity will be positive.

C)   The present value of residual income will be positive.

D)   Market value will be greater than book value.

The correct answer was B)

In a single-stage residual income model with ROE greater than the required rate of return, justified P/B will be greater than one, market value will be greater than book and residual income will be positive. There is no clear relationship with free cash flow to equity.