All in $ thousands 2008 2009 Actual Projection Net Earnings 1035 8645 At the beg of 2008 equity is $73M and cost of equity cap is 8%. What’s 2008 RI? Right so my understnading of this is Et - (Bt-1 x ke) however they use 2008 earnings and not 2009 estimates. Isn’t the earnings input into RI supposed to be projected earnings? This is Exam 2 AM Q19. Thanks
The question asked for 2008 RI, not projected 2009 RI. Therefore, you use 2008 NI less the equity charge.