A positive value for PVGO 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

PVGO stands for "present value of growth opportunities," which represents the value of a firm's future growth opportunities beyond its current earnings power. A positive value for PVGO suggests that the firm has investment opportunities with superior returns, indicating potential for future growth and higher earnings. Therefore, the best choice is (C). A positive return on equity or plowback ratio may also be indicative of growth potential, but they do not directly relate to PVGO. A high rate of constant growth is not necessarily implied by a positive PVGO.

A Positive Value for PVGO Suggests That the Firm Has