Explain how to solve a residual value problem.

Specifically.

• What is the definition of the annual residual with an explanation of how it is calculated.
• What is Book Value?
• How does book value change from year to year?
• What is a dividend payout ratio?
• Once a residual is calculated, what more is done to calculate the total value?
• If a problem says that there is no more residual after a certain time, what does that mean?
• What issue does Residual Value share with other valuation methodologies when determining the quality of the results.