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: (P/E - 1) / (P/E) * 100, where P/E is the price-to-earnings ratio. Here, P/E = $37 / $2.25 = 16.44. The percentage is ((16.44 - 1) / 16.44) * 100 = 59.00%.

If a Company Has a Current Stock Price of $37