shareValueRI: Calculates value of a share using the given Residual Income.

In stockAnalyst: Equity Valuation using Methods of Fundamental Analysis

Calculates value of a share using the given Residual Income.

Description

In the long term, companies that earn more than the cost of capital should sell for more than book value, and companies that earn less than the cost of capital should sell for less than book value. The residual income model of valuation analyzes the intrinsic value of equity as the sum of two components; first the current or the beginning book value of equity, and second, the present value of expected future residual income.

Usage

shareValueRI(bgnBVPS, RI, r, times)

Arguments

bgnBVPS	A number.
RI	A vector.
r	A number.
times	A vector.

Details

According to information provided by Jerald E. Pinto (2020), the method shareValueRI is developed to compute value of share using Residual Income Model with given values of Residual Income for the values passed to its four arguments. Here, bgnBVPS is the beginning or current book value per share, RI is a vector of given values of Residual Income for a specified number of years, times is a vector of number of years ranging from 1 to any specified number of years Residual Income Values are given, and r is the required rate of return on the stock.

Value

Input values to four arguments bgnBVPS RI, r, , times.

Author(s)

MaheshP Kumar, [e-mail]

References

Pinto, J. E. (2020). Equity Asset Valuation (4th ed.). Wiley Professional Development (P&T). https://bookshelf.vitalsource.com/books/9781119628194

Examples

shareValueRI(bgnBVPS=6,RI=c(1.40,1.80,3.175),r=0.10, times=c(1,2,3) )

stockAnalyst documentation built on Sept. 13, 2022, 5:07 p.m.