CFA Practice Question

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CFA Practice Question

ABC Corp. shares are currently trading at $54.16. If its current earnings are $3.45 and the required rate of return for the stock is 8.9%, which of the following best estimate the stock's present value of growth opportunities (PVGO)?

A. $15.40.
B. $19.75.
C. $22.47.
Correct Answer: A

PVGO = V0 - E/r = $54.16 - $3.45/0.089 = $15.40.

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