3. What is the principle assumption that allows an analyst to modify a residual earnings (RE)...

60.1K

Verified Solution

Question

Finance

3. What is the principle assumption that allows an analyst tomodify a residual earnings (RE) model to a residual operatingearnings (ReOI) model? In your answer, explain the primary benefitof a ReOI model over the RE model. (5 points)

Answer & Explanation Solved by verified expert
3.9 Ratings (770 Votes)
1 To understand why analysts modify a residual earning RE model to a residual operating earnings ReOI model let us identify the pros of a ReOI model over a RE model ReOI Net Profit After Tax t Weighted Average Cost of Capital Net Operating Asset t1 This equation    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

3. What is the principle assumption that allows an analyst tomodify a residual earnings (RE) model to a residual operatingearnings (ReOI) model? In your answer, explain the primary benefitof a ReOI model over the RE model. (5 points)

Other questions asked by students