Residual Income Formula Question

CFA Level II
#1

Sometimes RI is: net income - equity charge Sometimes RI is: (ROE - r) x BVPS why? why?

#2

those are both the same thing. ROE x BV(t-1) = net income R X BV(t-1) = equity charge

#3

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

#4

awesome I totally didn’t see that