Residual Income Q

Not sure if this is a stupid question, but on the Mendosa topic test the comment suggests that RI estimates profit of company after removing the cost of all capital (debt and equity) - is this not just after cost of equity hence the equity charge?

Net income/eps would already include the cost of debt, interest expense, so it seems right. You are removing an equity charge directly when you calculate it.

Ah yeah fair point. thanks