The present value of growth opportunities (PVGO) is equal toI) the difference between a stock's price and its no-growth value per share.II) the stock's price.III) zero if its return on equity equals the discount rate.IV) the net present value of favorable investment opportunities.
A) I and IV
B) II and IV
C) I, III, and IV
D) II, III, and IV
E) III and IV

Question

Quizplus · Accepted Answer

The present value of growth opportunities (PVGO) is indeed the difference between a stock's price and its no-growth value per share (I), is zero if its return on equity equals the discount rate because there are no excess returns to capitalize (III), and represents the net present value of favorable investment opportunities the company can undertake (IV).

The Present Value of Growth Opportunities (PVGO) Is Equal ToI)