The Net Present Value of Future Growth Opportunities (NPVGO)will Contribute

question 30

Multiple Choice

The net present value of future growth opportunities (NPVGO) will contribute to an above average P/E multiple when the additional share value created is

• A)positive and the return on new investment is lower than the cost of equity capital.
• B)positive and the return on new investment is greater than the cost of equity capital.
• C)negative and the return on new investment is lower than the cost of equity capital.
• D)negative and the return on new investment is greater than the cost of equity capital.

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Definitions:

Cyclic Alkanes

Saturated hydrocarbons forming a ring structure, also known as cycloalkanes, with the general formula CnH2n.

Decane

A straight-chain alkane with the chemical formula C10H22, commonly used in solvents and as a constituent of gasoline.

Alkane

A hydrocarbon compound consisting entirely of hydrogen and carbon atoms, arranged in a tree structure with single bonds, part of the paraffin series.

Formula

A representation of a substance using symbols and numbers to indicate the types and numbers of atoms present.