The Residual-Income Stock
Price Valuation Model
Robert F. Halsey
The Residual-Income Stock Price Valuation Models
The residual-income stock price valuation model has received considerable
academic attention during the past several years. It is theoretical

Market Equilibrium
The standard macroeconomic analysis of equilibrium in markets developed from the National
Income account equation, which measures Gross Domestic Product, GDP expresses equilibrium
relationships in economic markets. Gross Domestic Produc

Residual Earnings, Free Cash Flow and
Dividend Discount Valuation Models
The residual earnings, free cash flow and dividend discount model are valuation models for
estimating the intrinsic value of a company. The value to an investor of investing in a com

The Supply and Demand for Loanable Funds
Interest rates depend on demand and supply in securities markets, in addition they generally
move together for different types of securities. To help examine economic factors which may effect
interest rates in the

Abnormal Earnings Growth,
AEG Valuation Model
The Abnormal Earnings Growth, AEG valuation model is another model for estimating the
intrinsic value of a company. The estimated intrinsic value of equity, E0 is:
E0 =
1
I +
e 1 1
AEGt
t1
t=2
where:
I1
=
AEG

Gold Markets
The inverse demand and supply for gold in Northeasts economy in 2012 is:
PD = 848 2/5Q
PS = 200 + 1.2Q
The price of gold at the end of 2012 is expected to be $1,200 per ounce. The expected future
price was revised to $1,280 due to an increase

IS-LM Equilibrium
IS Curve
Desired consumption in Eastlakes economy, cd = 400 + .6(Y T) 400rt where Y is output, T is
taxes and r is the real interest rate. Taxes and desired investment are:
T=0
id = 410 600rt
Government purchases, G are 0.
LM Curve
Eastl

Capital Stock
The Chocolate Dessert Co. sells plastic cake decorations for $8. Chocolate Desserts has four
employees who mold cake decorations on molding machines which cost $100 per machine. The
number of cake decorations that can be manufactured for K m

Measurement of Risk
SVC Investment Co. is evaluating the risk of investing in an upcoming issue of Treasury
Notes with four year maturities on January 1, 2012. SVC Investment Co. estimates the notes may
have three yields with the following expected probab