Reading 45: Residual Income Valuation-LOS i 习题精选 discount, following, statements, 2011, class

土豆妮

Session 12: Equity Investments: Valuation Models
Reading 45: Residual Income Valuation

LOS i: Compare and contrast the residual income model to the dividend discount and free cash flow to equity models.

 

 

Which of the following statements least accurately explains the relationship between the residual income (RI) model, the dividend discount model (DDM), and free cash flow to equity (FCFE):

A) FCFE models use historical cash flows.

B) All the models discount future cash flows or income at the required rate of return.

C) RI models use an equity value from the balance sheet plus the present value of expected future residual income.

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In theory, the same value or total present value should be derived using expected dividends, expected FCFE, or book value plus expected residual income if the underlying assumptions are the same. However, the recognition of value is different because FCFE and DDM models forecast future cash flows, while residual income models start with a balance sheet measure of equity and add the present value of expected future residual income. A residual income model can be used along with other models to assess the consistency of results.

土豆妮

An argument against using the residual income (RI) valuation approach is that:

A) the models rely on accounting data that can be manipulated by management.

B) terminal value does not dominate total present value as is the case in dividend and free cash flow valuation models.

C) the models focus on economic rather than just on accounting profitability.

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An argument against using the RI approach is that the models rely on accounting data that can be manipulated by management. Both remaining responses are arguments in favor of the approach.

土豆妮

An argument against using the residual income (RI) valuation approach is that:

A) terminal value does not dominate total present value as is the case in dividend and free cash flow valuation models.

B) the models focus on economic rather than just on accounting profitability.

C) the models rely on accounting data that can be manipulated by management.

---

An argument against using the RI approach is that the models rely on accounting data that can be manipulated by management. Both remaining responses are arguments in favor of the approach.

土豆妮

An argument against using the residual income (RI) valuation approach is that:

A) terminal value does not dominate total present value as is the case in dividend and free cash flow valuation models.

B) the models focus on economic rather than just on accounting profitability.

C) the models rely on accounting data that can be manipulated by management.

---

An argument against using the RI approach is that the models rely on accounting data that can be manipulated by management. Both remaining responses are arguments in favor of the approach.

土豆妮

An argument against using the residual income (RI) valuation approach is that:

A) terminal value does not dominate total present value as is the case in dividend and free cash flow valuation models.

B) the models rely on accounting data that can be manipulated by management.

C) the models focus on economic rather than just on accounting profitability.

---

An argument against using the RI approach is that the models rely on accounting data that can be manipulated by management. Both remaining responses are arguments in favor of the approach.

土豆妮

An argument against using the residual income (RI) valuation approach is that:

A) the models rely on accounting data that can be manipulated by management.

B) terminal value does not dominate total present value as is the case in dividend and free cash flow valuation models.

C) the models focus on economic rather than just on accounting profitability.

---

An argument against using the RI approach is that the models rely on accounting data that can be manipulated by management. Both remaining responses are arguments in favor of the approach.

土豆妮

An argument against using the residual income (RI) valuation approach is that:

A) the models rely on accounting data that can be manipulated by management.

B) terminal value does not dominate total present value as is the case in dividend and free cash flow valuation models.

C) the models focus on economic rather than just on accounting profitability.

---

An argument against using the RI approach is that the models rely on accounting data that can be manipulated by management. Both remaining responses are arguments in favor of the approach.

土豆妮

An argument against using the residual income (RI) valuation approach is that:

A) terminal value does not dominate total present value as is the case in dividend and free cash flow valuation models.

B) the models rely on accounting data that can be manipulated by management.

C) the models focus on economic rather than just on accounting profitability.

---

An argument against using the RI approach is that the models rely on accounting data that can be manipulated by management. Both remaining responses are arguments in favor of the approach.

土豆妮

An argument against using the residual income (RI) valuation approach is that:

A) the models rely on accounting data that can be manipulated by management.

B) terminal value does not dominate total present value as is the case in dividend and free cash flow valuation models.

C) the models focus on economic rather than just on accounting profitability.

---

An argument against using the RI approach is that the models rely on accounting data that can be manipulated by management. Both remaining responses are arguments in favor of the approach.

土豆妮

An argument against using the residual income (RI) valuation approach is that:

A) terminal value does not dominate total present value as is the case in dividend and free cash flow valuation models.

B) the models focus on economic rather than just on accounting profitability.

C) the models rely on accounting data that can be manipulated by management.

---

An argument against using the RI approach is that the models rely on accounting data that can be manipulated by management. Both remaining responses are arguments in favor of the approach.