If a company has a current stock price of $37, an EPS of $2.25/share; EPS growth rate of 15% and the investors rate of return is 15%, calculate the percentage of share value arising from growth opportunities.

Question

Quizplus · Accepted Answer

The percentage of share value from growth opportunities is calculated using the formula: (P0 - (EPS / r)) / P0 * 100, where P0 is the current stock price, EPS is earnings per share, and r is the required rate of return. Substituting the given values: (37 - (2.25 / 0.15)) / 37 * 100 = 59.00%.

If a Company Has a Current Stock Price of $37