What is the most likely value of the PVGO for a stock with current price of $50,expected earnings of $6 per share,and a required return of 20 percent?
A) $10
B) $20
C) $25
D) $30

Question

Quizplus · Accepted Answer

PVGO (Present Value of Growth Opportunities) can be calculated by subtracting the stock's current market price from its intrinsic value (which equals expected earnings per share divided by the required return minus the growth rate). In this case, the intrinsic value would be ($6/0.20)-0 = $30 per share. Therefore, the PVGO would be $50-$30 = $20.

What Is the Most Likely Value of the PVGO for a Stock