In General, If a Firm Has Positive Present Value of Growth

question 24

Multiple Choice

In general, if a firm has positive present value of growth opportunities, then its price-earnings ratio:

• A)is greater than its required rate of return.
• B)is less than its required rate of return.
• C)equals its required rate of return.
• D)will be lower than the industry average.

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Definitions:

Interest Method

A method used in finance to calculate the interest portion of a payment or the return on an investment over a period of time.

Semiannual Interest

Interest that is both computed and disbursed semi-annually on an investment or loan.

Bond Discount

The financial disparity that occurs when a bond is sold for an amount below its stated face value, comparing its selling price to its face value.

Interest Method

A financial calculation used to determine the amount of interest due or earned over a specific period of time, considering factors like principal, rate, and time.