computingAbsRI {stockAnalyst} | R Documentation |
Calculates Residual Income using given values of Earnings Per Share (EPS) and beginning Book Values Per Share(bgnBVPS) for a specified number of years.
Description
Calculates Residual Income using given values of Earnings Per Share (EPS) and beginning Book Values Per Share(bgnBVPS) for a specified number of years.
Usage
computingAbsRI(EBIT, debt, equity, r, rd, t)
Arguments
EBIT |
A number vector. |
debt |
A number vector. |
equity |
A number vector. |
r |
A number. |
rd |
A number. |
t |
A number. |
Details
Residual Income is computed in three steps. Here, Step 1 is to compute preTaxIncome
as (EBIT minus rd
multiplied with debt). Step 2 is to get netIncome
as (preTaxIncome
minus (t
multiplied with preTaxIncome
) ), and finally step 3 is to obtain the Residual Income (RI) as netIncome
minus (r
times equity
).
According to information provided by Jerald E. Pinto (2020), the method computingAbsoluteRI
is developed to compute absolute value of Residual Income. Here, EBIT
is a number vector that hold values of EBIT in millions of dollars, debt
is a number vector that has dollar value of debt (expressed in millions of dollars), equity
is a number vector that holds dollar value of equity (expressed in millions of dollars), r
required rate of return on equity (expressed in decimal terms), rd
is cost of debt (expressed in decimal terms), and t
is rate of taxes. Output gives dollar value of Residual Income (expressed in millions of dollars).
Value
Input values to six arguments bgnBVPS
RI
, r
, , times
.
Author(s)
MaheshP Kumar, maheshparamjitkumar@gmail.com
References
Pinto, J. E. (2020). Equity Asset Valuation (4th ed.). Wiley Professional Development (P&T). https://bookshelf.vitalsource.com/books/9781119628194
Examples
computingAbsRI(EBIT=c(0.5,1.5,2.25),debt=c(1,2.2,2.5),equity=c(1,2.2,2.5), r=0.12,rd=0.07,t=0.30)