Value companies using the residual income model: intrinsic value = book value + PV of future economic profits (ROE - cost of equity) × book value. Also calculate Economic Value Added (EVA) and ROIC spread vs. WACC.
Value companies using the residual income model: intrinsic value = book value + PV of future economic profits (ROE - cost of equity) × book value. Also calculate Economic Value Added (EVA) and ROIC spread vs. WACC
Each component has a specific meaning:
Note: Interpret the residual income result against the thresholds and context described above.
Enter the residual income model: intrinsic value = book value + PV of future economic profits × book value for the scenario you are assessing. Value companies using the residual income model: intrinsic value = book value + PV of future economic profits (ROE - cost of equity) × book value. Also calculate Economic Value Added (EVA) and ROIC spread vs. WACC. Use the residual income result to inform your calculation.