An argument against using the residual income (RI) valuation approach is that:
A) |
terminal value does not dominate total present value as is the case in dividend and free cash flow valuation models. | |
B) |
the models rely on accounting data that can be manipulated by management. | |
C) |
the models focus on economic rather than just on accounting profitability. | |
An argument against using the RI approach is that the models rely on accounting data that can be manipulated by management. Both remaining responses are arguments in favor of the approach. |