We investigate a disaggregated version of the abnormal earnings growth (AEG) model of Ohlson and Juettner-Nauroth (2005). The value of the firm then becomes discounted free cash flows minus initial debt. Discounted free cash flows are equal to capitalized operating earnings from the initial...

In the abnormal earnings growth (AEG) model of Ohlson and Juettner-Nauroth (2005), there is one interest rate and no taxes. Their model focuses on bottom-line earnings and dividends and is hence viewed as an equity-level model. We first extend this model to a firm-level model based on operating...