Under Reading 37: Residual Income Valuation, Question #13:
When do I use the long-term growth rate for residual income? or do I not have to use it when using the below formula?
V = BV + [(ROE - r)*B] / (r - g)
Since RI = [(ROE - r)*B, after finding the residual income (RI), to find its terminal value, I assumed it would be calculated RI*(1 + g) / (r - g). However, in the book, it only uses the formula withouth growing the Residual Income. Why is this an exception the case when calculating the present value of residual income?