Which of the following descriptions of Residual Operating Income (ROPI) is incorrect?
A) The estimations of value per share of companies are the same when employing the ROPI and DCF model if the firm is growing at a constant rate.
B) ROPI = NOPAT- (WACC × NOA), and WACC × NOA is the dollar amount of return that lenders and shareholders expect the company to earn on their investment.
C) If a company utilizes overly conservative/aggressive accounting practices, its book value is understated/ overstated and will affect the estimate of the stock price using the ROPI model.
D) ROPI model uses information from both the income statement and balance sheet.
E) None of the above

Question

Quizplus · Accepted Answer

The Answer of Which of the following descriptions of Residual Operating Income (ROPI) is incorrect?
A) The estimations of value per share of companies are the same when employing the ROPI and DCF model if the firm is growing at a constant rate.
B) ROPI = NOPAT- (WACC × NOA), and WACC × NOA is the dollar amount of return that lenders and shareholders expect the company to earn on their investment.
C) If a company utilizes overly conservative/aggressive accounting practices, its book value is understated/ overstated and will affect the estimate of the stock price using the ROPI model.
D) ROPI model uses information from both the income statement and balance sheet.
E) None of the above

Which of the Following Descriptions of Residual Operating Income (ROPI)