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