A positive value for PRESENT VALUE OF GROWTH OPPORTUNITIES suggests that the firm has:
A)a positive return on equity.
B)a positive plowback ratio.
C)investment opportunities with superior returns.
D)a high rate of constant growth.

Question

Quizplus · Accepted Answer

The present value of growth opportunities (PVGO) calculates the value of a firm's future growth opportunities based on the difference between the market value of the firm and the book value of its assets. A positive PVGO suggests that the firm has investment opportunities with superior returns, meaning that investing in the company's growth projects will generate more value for shareholders than returning profits to them through dividends. Therefore, choice C is the best answer.

A Positive Value for PRESENT VALUE OF GROWTH OPPORTUNITIES Suggests