Explain how the dividend valuation model highlighting

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Reference no: EM132056028

Explain how the Residual Earnings Valuation Model (REVM) is related to the Dividend Valuation Model (DVM), highlighting any key assumptions in your analysis.

Answer tips: The theoretical equivalence of the models should be highlighted. A good answer would emphasize the role of the clean surplus relation in deriving the REVM from the DVM. Both models should ideally be carefully presented with all variables clearly defined. It should also be emphasized that the REVM is based on predictions of future comprehensive income (consistent with the role of the CSR) but that more specific assumptions about the form of accrual accounting practices are not required for the REVM to hold.

Reference no: EM132056028

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