Question

The residual income valuation model is a rigorous and straightforward valuation approach, but the analyst should be aware of all of the following implementation issues that will hinder its ability to measure firm value correctly except: _________

a. common stock transactions
b. portions of net income attributable to equity claimants other than common shareholders
c. dirty surplus accounting items
d. positive book value of equity

Answer 1

d. positive book value of equity

Step-by-step explanation:

The residual income valuation model is the valuation approach that could have the issues when it is implemented that can create difficulties for measuring the firm value in an accurate way for transactions done for common stock, net income portion for equity other than common stock,, and dirty surplus for an accounting items but not for the positive equity book value as it does not create the difficulties