| shareValueComputedRI {stockAnalyst} | R Documentation |
Calculates value of a share using given values of Earnings Per Share (EPS) and beginning Book Values Per Share (bgnBVPS) for a specified number of years.
Description
This valuation is sum of two components; first, the current or the beginning book value of equity, and second, the present value of expected future residual income that is computed as Earnings Per Share (EPS) minus the required rate of return on equity that is multiplied with beginning book value of per share. So, in this method RI is computed as discussed above and then this dollar value of Residual Income is discounted at the required rate of return on the equity and then beginning Book Value per Share (bgnBVPS) is added to arrive at the share value.
Usage
shareValueComputedRI(bgnBVPS, EPS, r, times)
Arguments
bgnBVPS |
A number. |
EPS |
A vector. |
r |
A number. |
times |
A vector. |
Details
According to information provided by Jerald E. Pinto (2020), the method shareValueComputedRI is developed to compute value of share using Residual Income Model with given values of Earnings Per Share (EPS) and beginning Book Values Per Share (bgnBVPS) for a specified number of years for the values passed to its four arguments. Here, bgnBVPS is a vector the beginning or current book value per share for a specified number of years, EPS is a vector of given values of Earnings Per Share 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 to be computed, and r is the required rate of return on the stock. As an internal step shareValueComputedRI computes Residual Incomes as EPS minus per share equity charge for specified number of years and then computes sum of discounted values of Residual Income that is added to current Book value per share to arrive at the share value.
Value
Input values to four arguments bgnBVPS EPS, r, and 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
shareValueComputedRI(bgnBVPS=c(6,7,8.25),EPS=c(2,2.5,4),r=0.10, times=c(1,2,3) )