The net present value of a growth opportunity, NPVGO, can be deﬁned as: A)the initial investment necessary for a new project. B)the net present value per share of an investment in a new project. C)a continual reinvestment of earnings when r G E) None of the above.

Question

The net present value of a growth opportunity, NPVGO, can be deﬁned as:
A)the initial investment necessary for a new project.
B)the net present value per share of an investment in a new project.
C)a continual reinvestment of earnings when r <G

D)a single period investment when r >G
E) None of the above.

Quizplus · Accepted Answer

The net present value of a growth opportunity (NPVGO) represents the value a new project or investment adds to a company's stock price per share, after accounting for the cost of capital. Therefore, option B, "the net present value per share of an investment in a new project," is the correct definition for NPVGO. Options A, C, D, and E are not correct definitions of NPVGO.

The Net Present Value of a Growth Opportunity, NPVGO, Can