Abstract
The author modifies three inputs to the residual income models: the measurement of the book value of assets, the estimation of the discount rate, and the projection of the time period of abnormal earnings. The author calls his model the residual income valuation model (RIVM). One of the inputs to the model is the beginning book value of assets; the author separates the book value into perpetual value assets (e.g., land) and operating capital. Because of the fundamental differences in these assets, the author makes separate adjustments to each category.
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