Intrinsic value = Book value per share + Present value of Residual Earnings discounted back at the stock’s cost of equity capital (i.e., investors’ required rate of return from investing in stocks).

We can now apply this model using the Valuation Tutor software. The next figure shows you a calculation for Amazon.Com in Valuation Tutor. You can see all the inputs required for the calculation:

It is important to understand where these numbers come from including what the projected financials look like over time. This lets you check how realistic important assumptions such as growth behavior are in terms of the implied future financial outcomes. When you click Calculate, Valuation Tutor also provides you with the details of the calculation: