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留学生毕业论文:Comparative Assessment of Feltham–O(3)

value). In addition, these models allow any other kind of information to involve in firm’s value
forecast. Whereas, the results of previous studies dealing with the survey of these models do not
confirm their usefulness in market prices forecast. The results suggest that the values calculated by
these models are lower than market value. We continue with the explanation on the principles of these
Discounted dividends models define the firm’s value as the present value of the future payable
dividends as follows:
E d V t (1)
61 International Research Journal of Finance and Economics - Issue 36 (2010)
Where: V t : Market value of the firm's equity at time t
Et [dt+i]: Estimated dividends at time t+i
r: Discount rate or cost of capital
The concept of clean surplus is confirmed on this rule that the retained earnings is restricted to
the registration of earnings and dividends within the period. Hence, the relationship between the book
value of the stakeholders’ equity and the earnings and dividends can be stated as follows:
bt = bt−1+ X t − dt (2)
Where: bt: Book value of equity at time t
Xt: Accounting profits of year t
The book value of the Stakeholders’ equity at time t-1 multiplied by the capital cost rate is
considered as the firm’s normal earnings. So, the earnings of time t minus the firm’s normal earnings
can be defined below as abnormal earnings:
X X t rb t
t = − −1 (3)
Where: X a
t : Abnormal earnings of year t
With the combination of equations 2 and 3,equation 4 can be written as follows:
d X ( r )bt bt
t = t + 1+ −1− (4)
Using the above equation and substitution of dt+i in Equation 1, one can reach valuation model
based on abnormal earnings or residual income:
( ) Σ
= +

1 1
( ]
t t r
V b E X i
t t i (5)
Abnormal profit or residual profit valuation model indicate that firm’s value equals to the
stakeholders’ equity book value plus the current value of future expected abnormal profits (G.A.D.
Preinrich, 1983; E.O. Edwards and P.W. Bell, 1961; and K.V. Peasnell, 1982). It is the one of the
interesting features of this model that the firm’s value is not affected by accounting methods.
2.1.2. Ohlson (1995) Linear Information Model
Ohlson assumes that the time-series behavior of abnormal earnings is as follows:
+1 11 1 +1 = + + t t
t x ω x V ε (6)
+1 2 +1 = + t t t V γV ε
xt : abnormal earnings of year t
Vt : Other information variable at time t
11 ω : Persistence of abnormal earnings ( 0 1 11 < ω < )
After prediction of abnormal earnings, Ohlson applied them in his valuation model as follows:

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