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You cannot use residual valuation model to a firm with negative book value of equity because: it gives negative required income and no investor will
You cannot use residual valuation model to a firm with negative book value of equity because:
it gives negative required income and no investor will ever require that. | ||
negative market value of equity. | ||
positive residual income when no investor expects a firm in such bad shape to have that. | ||
the formulas cannot be calculated anymore (undefined values). |
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