why is RiT added back. I need to conceptualize this.
I’m assuming this is the terminal value calculation. You have to add the RI calculated for that year and discount it back. You can also form the equation so that: (PT - BT / (1+r)^T) + (riT/ (1+r)^T) It means the same thing. The entire concept of valuing equity is premised on discounting future cash flows. By not including riT, you are not including that year’s cash flow.