Residual Income .

• Residual Income

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Bruce Dehning Publications

1 “Measuring the Performance of Clusters and Firms within Clusters Using the Residual Income Model” (with Drahomira Pavelkova) – Journal of Economics, Volume 57, No. 3, 2009, pp. 230–246, published by the Institute of Economic

Research of the Slovak Academy of Sciences, (“Využití modelu založeného na přístupu

residual income pro měření výkonnosti klastrů a firem v klastrech” – Ekonomický Časopis, roč. 57, č. 3, 2009. ISSN 0013-3035, Ekonomický

ústav Slovenská akadémia vied.


Nazism

1 To tie farmers to their land, selling agricultural land was prohibited. Farm ownership was nominally

private, but discretion over operations and residual income were

proscribed. That was achieved by granting business monopoly rights to

marketing boards to control production and prices with a quota

system.https://store.theartofservice.com/the-residual-income-toolkit.html

Theory of the firm - Team production

1 Such monitoring as is therefore necessary, however, can only be

encouraged effectively if the monitor is the recipient of the activity’s residual income (otherwise the

monitor herself would have to be monitored, ad infinitum)


Theory of the firm - Williamson's approach

1 Williamson sees the limit on the size of the firm as being given partly by costs of delegation (as a firm’s size

increase its hierarchical bureaucracy does too), and the large firm’s

increasing inability to replicate the high-powered incentives of the residual income of an owner-

entrepreneur


Outline of finance - Discounted cash flow valuation

1 ** Residual Income Valuation


Corporate finance - Investment and project valuation

1 Alternatives (complements) to NPV include Residual Income Valuation,

Market value added|MVA / Economic value added|EVA (Joel Stern, Stern Stewart Co) and Adjusted present

value|APV (Stewart Myers)


Economic value added - Calculating EVA

1 EVA = net operating profit after taxes – a capital charge [the residual income method]


Economic value added - Comparison with other approaches

1 Although EVA is similar to residual income, under some definitions there may be minor technical differences between EVA and RI (for example,

adjustments that might be made to NOPAT before it is suitable for the

formula below)


Surplus value - Morality and power of surplus value

1 In practice, within the capitalist firm, no standard procedure exists for

measuring such a productive contribution and for distributing the

residual income accordingly.


Residual income valuation

1 Residual Income valuation has its origins in Edwards Bell (1961),

Peasnell (1982), and Ohlson (1995).[http://www.eurojournals.com/REFAS_

1_04.pdf]


Residual income valuation - Calculation of residual income

1 :Residual income = Net Income - Equity Charge.


Residual income valuation - Valuation formula

1 Using the residual income approach, the company valuation|value of a

company's stock can be calculated as the sum of its book value and the present value of its expected future residual income, discounted at the

cost of equity, r, resulting in the general formula:


Residual income valuation - Comparison with other valuation methods

1 As can be seen, the residual income valuation formula is similar to the

dividend discount model (DDM) (and to other discounted cash flow (DCF)

valuation models), substituting future residual earnings for dividend (or free

cash) payments (and the cost of equity for the weighted average cost

of capital).



1 Further, value is recognized earlier under the RI approach, since a large part of the stock's intrinsic value is recognized immediately - current

book value per share - and residual income valuations are thus less

sensitive to terminal value



1 Although EVA is similar to residual income, there will be technical differences between EVA and RI, specifically Stern Stewart Co, originators of

EVA, recommend a fairly large number of adjustments to NOPAT before the methodology

may be applied.[http://maaw.info/Chapter14.htm][http://www.analystforum.com/forums/cfa-forums/cfa-level-ii-forum/91309816] See

Economic_value_added#Comparison_with_other_approaches|Economic value added# Comparison with other approaches.


Nazis - Economics

1 To tie farmers to their land, selling agricultural land was prohibited.Germany, 1871-1945: A Concise History By Raffael

Scheck p. 167 ISBN 978-1845208172 First Edition Farm ownership was nominally

private, but discretion over operations and residual income were proscribed. That was achieved by granting business monopoly

rights to marketing boards to control production and prices with a quota system.


Fuel poverty - Definitions

1 are above the median level; and if they were to spend what is required,

then the household would be left with a residual income below the

official poverty line. Additionally, a Fuel Poverty Indicator has been

created, which shows how far into fuel poverty


Surplus-value - Morality and power of surplus value

1 In practice, within the capitalist firm, no standard procedure exists for

measuring such a productive contribution and for distributing the

residual income accordingly.


WGA screenwriting credit system - Rationale

1 It can also affect income. While all writers are paid when they work, some contracts limit payments to

writers if they are not officially credited. Additionally, only credited

writers typically receive residual income from future exploitation of a

film on video, pay-per-view, broadcast television, etc.


Milton Berle - Mr. Television

1 Berle asked NBC to switch from live broadcasts to film, which would have made possible reruns (and residual income from them); he was angered when the network

refused. NBC did consent to make a kinescope of each show, however. Later,

Berle was offered 25% ownership of a company manufacturing the teleprompter by

its inventor, Irving Berlin Kahn, if he would simply use the new gadget on his program.

He turned the offer down.


The Last Man on Earth (1964 film) - Release

1 In order to keep receiving residual income from the film, though, he had to be credited, and so used the name Logan Swanson - a combination

of his wife's mother's maiden name and his mother's maiden name.Richard Matheson

Storyteller: The Last Man on Earth — Midnight Movies Double Feature: Panic in Year Zero / The Last Man on Earth DVD, 2005, Region 1, Metro-Goldwyn-Mayer Author Matheson remarked, I was disappointed in the film, even though they

more or less followed my story


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