CFA Practice Question

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CFA Practice Question

A high proportion of the value of a growth stock comes from ______.

I. past dividend payments
II. past earnings
III. PVGO (Present Value of Growth Opportunities)
A. III only
B. I and III
C. II and III

User Contributed Comments 5

User Comment
cahiz84 any explanation?
mordja Past earnings and dividends will be small compared to future potential so they are unlikely to contribute much to the valuation.

The present value of future growth opportunities is the only option that makes sense
Lamkerst PVGO is calculated by finding the difference between price of equity with constant growth and price of equity with no growth.
flpe1047 Past dividends and earnings growth are significant for growth companies. Growth stocks are characterized by the upside of buying an undervalued stock.
birdperson in a DCF valuation, all you care about is future cash flows...
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