When fully consistent assumptions are used to forecast earnings, cash flow, dividends, book value, and residual income through a full set of pro forma (projected) financial statements, and the same required rate of return on equity is used as the discount rate, the same estimate of value should result from a residual income, dividend discount, or free cash flow valuation. In practice, however, analysts may find one model easier to apply and possibly arrive at different valuations using the different models.
CD Interest Income: I only have one CD account left in the amount of $185,000 paying 3%. It expires at the end of 2018 and I’ll have to figure out what to do with it. After selling my SF rental house in mid-2017 for 30X annual rent, I’m left with about $500,000 in cash after investing ~$2,200,000. The best CD today is the CIT Bank 12-month CD at 2.5%. That’s pretty darn good because just a couple years ago, such a CD was less than 0.5%. The yield curve is flattening, meaning folks should take advantage of shorter duration CDs.
Managerial accounting defines residual income in a corporate setting as the amount of leftover operating profit after all costs of capital used to generate the revenues have been paid. It is also considered the company's net operating income or the amount of profit that exceed its required rate of return. Residual income is normally used to assess the performance of a capital investment, team, department or business unit.