Guys i am facing a confusion in Residual Income Topic:
For the case where Residual Income Declines to Long run Level in mature industry, CFAI & Scheweser are going in different directions:
According to CFAI formula for continuing Residual Income is : (Pt−Bt)/(1+r)T
However, Scheweser says: (Pt - Bt) + RIt / 1 + r
Can any please explain the difference? And what is the correct approach?
Similar to GIPS, in cases when Schweser and CFAI conflict, candidates are encouraged to follow the laws/regulations/lessons/formula of the supplementary study material while making full disclosure of the conflict in your own study notes. (Remember, Schweser is The Bible.)
Did you ever figure out why these formulas were different? I’m struggling with the same thing.
Ignore what you see in Schweser, on exam day it is the CFAI material content that will be correct not Schweser!