The following are forecasted residual operating income (ROPI) for Reed Corporation for 2017:
Current
Forecast Horizon
Terminal
($millions)
2017
2018
2019
2020
2021
Year
Residual operating income (ROPI)
$2,499
$2,624
$2,755
$2,893
$3,038
$3,099
Assume a discount rate of 6%, an expected terminal growth rate of 2%, 2017 NOA of $29,896, and 2017 NNO of $17,314.
What is the firm’s equity value using the ROPI valuation model?
Select one:
A. $71,130
B. $53,816
C. $67,988
D. $17,314
E. None of the above
