Equities: Residual Income

Question #5 page 617: NOPAT - (WACC x Invested Capital) vs. EPS - (r x BV) Why do they use the above formula instead of the lower one?

You can use either formula for that question. They gave you all all of the necessary inputs to compute RI both ways. Just take out your after tax cost of interest from NOPAT to get NI: 10MM - 9%(1-t)*50MM = 7.3MM - (.12*50MM) = 1.3MM RI

BUT I believe you cannot use both formulas for all question, normally I think you do NI-k(Equity) whereas NOPAT-k(capital) = MVA.

I think that is the forumula for MVA where you are considering debt as well