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

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

Quizplus · Accepted Answer

With a 100% payout ratio, the stock would be valued at $30 ($6/0.20 = $30). Thus, the $20 of additional price must represent the PVGO.

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