Question #57
Reading: Reading 20 Discounted Dividend Valuation
PDF File: Reading 20 Discounted Dividend Valuation.pdf
Page: 23
Status: Correct
Correct Answer: A
Question
Tri-coat Paints has a current market value of $41 per share with an earnings of $3.64. What is the present value of its growth opportunities (PVGO) if the required return is 9%?
Answer Choices:
A. $0.56
B. $1.27
C. $3.92
Explanation
The PVGO is $0.56:
PVGO = $41 – ($3.64 / 0.09) = $0.56