If a Company Has a Current Stock Price of $40

question 381

Multiple Choice

If a company has a current stock price of $40, an EPS of $1.5/share; EPS growth rate of 15% and the investors rate of return is 10%, calculate the percentage of share value arising from growth opportunities.

• A) 53%
• B) 58%
• C) 63%
• D) 68%
• E) 73%

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Definitions:

Operating Assets

Assets directly involved in the manufacturing or sale of products or services in the normal course of business.

Return on Investment

A measure of the profitability of an investment, calculated as the net profit of the investment divided by the initial cost.

Controllable Fixed Costs

Expenses that can be managed or influenced by decisions made by a company's management, such as advertising expenditures.

Operating Assets

Assets used by a business in its day-to-day operations to generate revenue.