Answer-first summary for fast verification
Answer: $25.33.
## Explanation The formula for stock value is: \[ V_0 = \frac{E_1}{r} + PVGO \] Rearranging for PVGO: \[ PVGO = V_0 - \frac{E_1}{r} \] Where: - \( V_0 \) = stock price = $72 - \( E_1 \) = EPS = $3.50 - \( r \) = required rate of return = 7.5% = 0.075 \[ PVGO = 72 - \frac{3.50}{0.075} \] \[ PVGO = 72 - 46.67 \] \[ PVGO = 25.33 \] The present value of growth opportunities is $25.33, which corresponds to option A. **Answer: A**
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$3.50 and a stock price of $72 per share. If the required rate of return is 7.5%, the present value of growth opportunities is closest to:A
$25.33.
B
$28.83.
C
$46.67.
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