Answer :
$0.66 is the present value of its growth opportunities (pvgo) if the required return is 9%.
PVGO stands for Present Value of Growth Opportunities and represents the future growth value of a company. The PVGO index measures the potential value creation of a company by reinvesting profits back into itself. H. By accepting projects that drive future growth
Calculating the problem:
Tri-coat paints has a current market value of $38 per share
They also have an earning of $3.36
The required return is 9%
= 9/100
= 0.09
The present value of its growth opportunities can be calculated as follows:
= $38-($3.36/0.09)
= $38 - $ 37.33
= $0.66
What are growth opportunities? how are they rated?
In corporate finance, present value of growth opportunity (PVGO) is a metric applied to growth stocks. It represents the percentage of a company's stock value that corresponds to (expected) revenue growth.
What does high PVGO mean?
A high PVGO means that the company has many growth opportunities to pursue, which could add value to the company in the future.
Learn more about Growth opportunity:
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