Question #60
Reading: Reading 23 Residual Income Valuation
PDF File: Reading 23 Residual Income Valuation.pdf
Page: 30
Status: Unattempted
Question
Among the various price multiples, the residual income model is most closely linked to which of the following?
Answer Choices:
A. Price to book value (P/B)
B. Price to free cash flow (P/FCF)
C. Price to earnings (P/E)
Explanation
The residual income model is most closely linked to P/B because justified P/B is directly
linked to expected residual future income.