question archive When calculating the residual income by using the formula: Residual income = NOPAT – Capital Charge, why the NOPAT here should be EBIT*(1-tax rate) rather than EBIT*(1-tax rate)+Interest expense*tax rate? Which is better and why?

When calculating the residual income by using the formula: Residual income = NOPAT – Capital Charge, why the NOPAT here should be EBIT*(1-tax rate) rather than EBIT*(1-tax rate)+Interest expense*tax rate? Which is better and why?

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When calculating the residual income by using the formula: Residual income = NOPAT – Capital Charge, why the NOPAT here should be EBIT*(1-tax rate) rather than EBIT*(1-tax rate)+Interest expense*tax rate? Which is better and why?

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