When computing EVA = Nopat- $wacc, do we use beginning total invests capital or ending? As far as I know we would use beginning since it makes sense in that the Econ profit was created from that capital. Plus I recalled seeing a capital. Up budgeting vignette in a mick they use beginning
in Schweser volum 1 Q22 they use ending, plus they don’t specifically clarify which year they r asking for.
any one can confirm?
I would go with the module and CFA mock . Better from the horse’s mouth. Use the beggining .
I think I have a similar problem as yours w.r.t. calculating ROE and equity charge for residual income. Seems like calculations are not always consistent in different examples.
In practice one actually used average capital but in CFAI readings I am pretty sure they use beginning capital
As a general rule when using formulas with Balance Sheet items I would use average amount of its in FRA and beginning amount if its elsewhere in the curriculum.
I think of it this way. When you are computing returns for a period, surely it makes more sense to use the beginning period as the base and not the end right?
you do not use avg E for RI…use begin period E.
What about equity? Beginning or average ?