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if a companys stock is currently trading its intrinsic value of $30, the projected earnings per...

if a companys stock is currently trading its intrinsic value of $30, the projected earnings per share is $3.00 and the required rate of return on common stock is 12 percent, what is the present value of growth opportunities

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Answer #1

Formula for Present Value for Growth Opportunities(PVGO):-

where, P0 = Current Intrinsic Value = $30

E1 = Earning per share next year = $3

r = Required rate of Return = 12%

PVGO = $30 - $25

=$5

So, the present value of growth opportunities is $5

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