CFA Level 2 | Equity: Residual Income Model

[@thanhang4949]

Thanks Moa, very good at explaining and summarising RI model!

[@FabianMoa]

Glad it was helpful!

[@richardgordon]

You are really good at explaining this stuff!!

[@FabianMoa]

Thanks for the compliment, Richard! Hope you found it useful

[@harrisonmacgeorge3518]

Hi Fabian, why does the ' * Bt-1' remain when you divide through by Bt-1 to express EPS in the form of ROE? I thought it would have gone something like the below. What am I missing? I.e. RI = Et - (r * Bt-1) RI = RI = Et/Bt-1 - (r * Bt-1)/Bt-1 RI = ROE - r

[@Vedicqueen]

suppose I have to calculate it for a real listed firm, what should I take as my required rate of return?

[@FabianMoa]

Cost of equity

[@newmercies1]

Use the CAPM model to calculate your cost of equity. The average Eq.Risk Premium of S&P 500 from 1928-2022 (end of) is 6.64%

[@newmercies1]

@@FabianMoa was wondering if you could advise on the multi-stage residual income valuation. I am struggling with that. Any videos?

[@FabianMoa]

Yes, I do have 2-3 videos on that. Check out the Level 2 playlist on my channel.