which of these is correct and why?
Share
Please briefly explain why you feel this question should be reported.
Please briefly explain why you feel this answer should be reported.
Please briefly explain why you feel this user should be reported.
statement 3 is the most accurate. Raman agrees with Mendosa’s concerns about using the FCFE model to value PRBI’s stock, and suggests that the residual income (RI) model would be a better approach. The RI model takes into account all capital costs, including both debt and equity, and does not rely on assumptions about future earnings. Therefore, the justified price-to-book (P/B) ratio is directly related to expected future residual income. This suggests that the RI model may provide a more accurate valuation of PRBI’s stock, especially given the company’s expected increase in net borrowing over the next few years.