Residual income - Question 24 - solution page 421

why do they take the dividend from 2012 and deduct it from 2013 calculation of Residual income?

my guess is: book value is used to calc RI, equity charge. Earrings add to book value unless distributed as a dividend. So previous years earnings are added to book value less dividends to come up with current year book value in order to calculate equity charge that you deduct from eps along with debt charge in order to calculate ri.

To get the next years bvps you take the previous years bvps and add in earning and subtract the dividends from that year. Is that what you are referring to?

yes thanks.