Question #83
Reading: Reading 20 Discounted Dividend Valuation
PDF File: Reading 20 Discounted Dividend Valuation.pdf
Page: 32
Status: Unattempted
Question
Obsidian Glass Company has current earnings of $2.22, a required return of 8%, and the present value of growth opportunities (PVGO) of $8.72. What is the current value of Obsidian's shares?
Answer Choices:
A. $36.47
B. $27.75
C. $10.94
Explanation
The current value is $36.47. V0 = ($2.22 / 0.08) + $8.72 = $36.47