Question #75
Reading: Reading 23 Residual Income Valuation
PDF File: Reading 23 Residual Income Valuation.pdf
Page: 35
Status: Unattempted
Correct Answer: A
Question
Continuing residual income is defined as the:
Answer Choices:
A. residual income that is expected beyond the initial forecast time horizon
B. residual income that forces the net present value to zero
C. permanent as opposed to the transitory part of residual income
Explanation
Continuing residual income is defined as the residual income that is expected beyond the
initial forecast time horizon. It comes into play when RI is forecast for a defined time
horizon and a terminal value based on continuing RI is estimated at the end of that time
frame.