Residual Income Formula Question charge, equity, income

therecruit

Sometimes RI is: net income - equity charge

Sometimes RI is: (ROE - r) x BVPS

why?

why?

19831985

It's the same thing:

RI = EPS (or NI if you like) - r x BVPS

but remember ROE = EPS / BVPS which means EPS = ROE x BVPS

So yo have

RI = ROE x BVPS - r x BVPS

= (ROE - r) x BVPS

Sportsman

awesome

I totally didn't see that