Value equity as book value plus the present value of residual income.
Please do not make financial decisions based on these results.
What is the Residual Income Calculator?
Value equity as book value plus the present value of residual income. To use the Residual Income Calculator, enter net income, equity, cost of equity; it returns residual income, equity charge, and shows them instantly as you type.
Where the Residual Income Calculator fits
Value equity as book value plus the present value of residual income. The main figure it returns is the Residual income, worked out from the values you enter.
It belongs with the other stocks & equity analysis tools. If you are comparing options or checking a result from another angle, try the Dividend Discount Model Calculator, Price to Book Ratio Calculator or the Dividend Calculator.
How to use the Residual Income Calculator
- Enter your numbers. Start with Net income ($), Equity ($), Cost of equity (%). Take price and share figures from the latest filing or quote. Fields marked optional can stay at zero.
- Read the result. The highlighted box gives the Residual income, and the cards below show Equity charge. Tables and charts break it down further.
- Test other scenarios. Results update as you type. Change one value at a time to see what drives the answer, and press Reset to go back to the defaults.
Formula and how it works
Example with real numbers
Here is the Residual Income Calculator using the default values shown in the calculator above:
Inputs
| Net income ($) | 950,000 |
|---|---|
| Equity ($) | 8,000,000 |
| Cost of equity (%) | 10 |
Results
| Residual income | $150,000.00 |
|---|---|
| Equity charge | $800,000.00 |
With these inputs the calculator returns Residual income: $150,000.00. Change any value in the calculator to see how the result moves.
What if you change one input?
Sensitivity check: raising Net income ($) from 950,000 to 1,140,000 (about 20% higher) and leaving everything else as in the example above changes the results like this:
| Result | Example | After the change | Change |
|---|---|---|---|
| Residual income | $150,000.00 | $340,000.00 | +126.7% |
| Equity charge | $800,000.00 | $800,000.00 | 0% |
The input that moves the result most is the one to check twice. Change it in the calculator above to test your own case.
What the results tell you
The results panel of the Residual Income Calculator reports Residual income and equity charge. Compare these figures while changing one input at a time, and use the related calculators below to look at the same situation from another angle.
Method and limits. This calculator applies the formula in the section above to your inputs, in your browser; nothing you enter is stored on our servers. The result is only as accurate as the numbers you enter and the formula shown above. It is for information, not financial, tax or legal advice.
Frequently asked questions
What does residual income show?
Profit remaining after charging shareholders their required return.
Is a high dividend yield good?
Not automatically. A very high yield can signal a falling price or a dividend that may be cut.
Are valuation results investment advice?
No. They are model outputs from the figures you enter. Test a range of assumptions and speak with a licensed adviser before investing.
Are the results guaranteed?
No. Results depend entirely on the numbers you enter and the formulas shown on this page. Please do not make financial decisions based on them alone; confirm important figures with a licensed professional.
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