CFA Level 2 | Equity: Residual Income Model

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CFA Level 2
Topic: Equity Valuation
Reading: Residual Income Valuation
The residual income model is used to estimate the intrinsic value of equity.
This video covers:
- a definition of the residual income model
- guidelines for using the residual income model
- an example on estimating intrinsic value using the residual income model
Find out more about the CFA Level 2 exam preparatory courses offered at Noesis (www.noesis.edu.sg/programme/cfa). We offer face-to-face tuition classes (lecture and revision/review) in Malaysia and the Blended Online (B/O) mode for candidates from Malaysia, Singapore, and Vietnam.

[@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

[@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.