calculate the present valu of growth opportunities in a stock priced $86, r=10% and earning 3.17.
86 - 3.17/.1 = 86 - 31.7 = 54.3
86-3.17/.1 = 54.3 V = E/R + PVGO i.e. V- E/R = PVGO
$17.12
Along these lines, how nasty is the test going to get? In regards to Franchise Factor, 1/r - 1/ROE…will they give us the parts of a DuPont method and not the outright ROE?
CP & CFA are correct PCGO measures the growth in value besides the original value of the stock
PVGO
17.12 is the franchise PE. I keep forgeting formulas…not a good sign.
dreary how did you get the other things needed? ROE? g? b? did you make some assumptions? you are given only E, r and P. Where did you get the numbers to calculate the FF and get a 17.12 plausible number out of thin air? Am I missing something?
He did this: P/E = tangible P/E + franchise P/E 86/3.17 = 1/.1 + franchise P/E franchise P/E = 17.13
I just studied this 2 days ago and for love of god i didn’t know what to do when i read the question. is this happening to all of you as well? or i am REALLY REALLY BEHIND i know that.
AudreyMwala Wrote: ------------------------------------------------------- > calculate the present valu of growth opportunities > in a stock priced $86, r=10% and earning 3.17. 3.17/.1 +x= 86 --> x=54.3
Did it just like mp2438 did. In fact that’s how I get the answers: First do the easy to remember franchise P/E, then multiply by earnings to get PVGO. 17.12 * 3.17 = $54.30