Your roommate has recently taken an interest in day-trading and is attempting to identify undervalued firms. After scouring the online discussion boards, your roommate decides to use the book value method, because of the public availability of balance sheet data and the ease of calculation. What best summarizes any possible reservations you may have about the common stock valuation model proposed?

A) Your roommates estimates are likely to overestimate the value of the firm, because the book value method is based on historical earnings data, rather than the expectation of the firms future accounting performance.

B) Your roommates estimates are likely to underestimate the value of the firm, because the book value method is based on historical accounting data, rather than the expectation of the firms future earnings.

C) Your roommates estimates are likely to accurately estimate the value of the firm, because the book value method is based on historical accounting data, which is a strong predictor of the firms expected future earnings.

D) Your roommates estimates are likely to accurately estimate the value of the firm, because the book value method is based on historical earnings data, which is a strong predictor of the firms future accounting performance.

(PLEASE EXPLAIN THE REASONING BEHIND THE ANSWER)