Value = Book value + PV of RI streams
Where RI = Net Income - (equity * cost of equity)
Based on this formula, how would a company’s book value make this formula more/less reliable?
Scenario A: privately held software startup run entirely on human talent, with no physical assets
Scenario B: PE-backed manufacturer who has invested heavily into factories and machinery
Would one of these scenarios favor the RI valuation method, and if so, why?