Abstract: Residual Income Model (RIM) is one of classic models that applied in evaluating the value of companies' equity. Specially, Ohlson RIM is popular model in the period of finance and accounting since it adopts history accounting data. Following the logic of deductive reasoning and normative analysis, a new investment decision model is built based on the general residual income model under the assumption that return on equity (ROE) changes in different period of product life cycle. Different period of product life cycle has different characteristic of development in ROE, namely, ROE increases in growth period and decreases in decline period while ROE keeps industry average in mature period of product life cycle. Then, empirical data which assigned differently to each parameter was used to test the feasibility of this model. The result shows that the new investment decision model is applicable for making investment decisions in practice and has made several theoretical contributions. Firstly, the application of RIM is expanded from evaluating company's equity to the application in the assessment of investment decision. Secondly, the infinite problem of RIM is resolved and finally, it could be used to find the maximum value of investment decisions.

Key words: product life cycle, Residual Income Model, multi-stage Residual Income Model, project investment decision-making