Valuation – Valuation Techniques (Advanced)

Articles

What Is the Residual Income Model (EVA) in Valuation?

Why the Residual Income / EVA model often beats a DCF for valuing banks and capital-intensive businesses, and how the capital charge and cost of equity drive it.

How to Calculate Residual Income (EVA) in a Finance Interview

A step-by-step walkthrough for answering a Residual Income Model interview question: book value roll-forward, capital charge, discounting, and terminal value.

Cases

Residual Income Model

As a valuation analyst, you are tasked with building a Residual Income (Economic Value Added) valuation for a bank and explaining why this approach can outperform a standard discounted cash flow (DCF) model for banks and other capital-intensive businesses.