1. From the perspective of shareholders, why do you agree (or disagree) that the residual earnings is a more accurate measure compared to the conventional earnings? Discuss the drivers of residual earnings as part of your answer.
(250 words)
2. Using examples, critically explain factors to be considered in estimating the growth rate of the residual earnings model at the end of the forecast period.
(250 words)
Use the two or three of the three references:
Main textbooks
S.H. Penman, Financial Statement Analysis and Security Valuation (McGraw Hill) Fifth Edition
K.G. Palepu, V.L. Bernard, P.M. Healy and E. Peek. Business Analysis and Valuation: IFRS edition (Thomson Learning)
R.H. Parker, Understanding Company Financial Statements (Penguin)
