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What is the most likely value of the Present Value of Growth Opportunities (PVGO) for a stock with a current price of $50, expected earnings of $6 per share, and a required return of 20%?
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What is the most likely value of the Present Value of Growth Opportunities (PVGO) for a stock with a current price of $50, expected earnings of $6 per share, and a required return of 20%?

User TesterDick
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1 Answer

4 votes

Answer:

20$

Step-by-step explanation:

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

User Nicholas Palko
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