Net Present Value Of Growth Opportunities - NPVGO

Loading the player...

What is the 'Net Present Value Of Growth Opportunities - NPVGO'

The net present value of growth opportunities (NPVGO) is a calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. The net present value of growth opportunities is used to determine the intrinsic value of a new project or acquisition at a given point in time, based on projected amounts.

NPVGO is calculated by taking the net cash inflow, discounted at the firm's cost of capital, less the purchase price of the additional asset. It is also referred to simply as the present value of growth opportunities (PVGO).

BREAKING DOWN 'Net Present Value Of Growth Opportunities - NPVGO'

By computing the present value of growth opportunities, a company can determine what the new addition or expansion project will add to the value of the existing firm. Even further, an appropriate purchase price can be determined by using the present value model.

By deducting the purchase price from the present value of growth opportunities, you will be left with the net present value of growth opportunities.

RELATED TERMS
  1. Net Present Value Rule

    A rule stating that an investment should be accepted if its net ...
  2. Adjusted Present Value - APV

    The Net Present Value (NPV) of a project if financed solely by ...
  3. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present ...
  4. Present Value - PV

    The current worth of a future sum of money or stream of cash ...
  5. Commuted Value

    The present value of the future series of cash flows required ...
  6. Embedded Value

    A common valuation measure used outside North America, particularly ...
Related Articles
  1. Investing

    Understanding Net Present Value

    Learn how this value is used to determine the worth of a project.
  2. Financial Advisor

    What's a Hurdle Rate?

    Hurdle rate has two meanings. In the business world, a business typically makes a decision on a capital project based on the net present value approach. To determine the net present value, the ...
  3. Trading

    Time Value Of Money: Determining Your Future Worth

    Determining monthly contributions to college funds, retirement plans or savings is easy with this calculation.
  4. Investing

    Understanding The Time Value Of Money

    Find out why time really is money by learning to calculate present and future value.
  5. Investing

    Calculating Net Present Value at Different Points Using Excel

    Calculating the net present value (NPV) of your investment projects using Excel.
  6. ETFs & Mutual Funds

    Value Investing Strategies in a Volatile Market

    Volatile markets are a scary time for uneducated investors, but value investors use volatile periods as an opportunity to buy stocks at a discount.
  7. Investing

    What Is The Intrinsic Value Of A Stock?

    Intrinsic value reduces the subjective perception of a stock's value by analyzing its fundamentals.
  8. Markets

    Calculating the Present Value of an Annuity

    The present value of an annuity is the current, lump sum value of periodic future payments as calculated using a specific rate.
  9. Investing

    What Is The Intrinsic Value Of A Stock?

    Intrinsic value can be subjective and difficult to estimate. It’s a perception of a security’s value that factors tangible and intangible factors.
  10. Trading

    Calculating Present Value Interest Factor

    The present value interest factor is a number that makes it easier to calculate the present value of a payment or value to be received in the future.
RELATED FAQS
  1. How do you use a financial calculator to determine present value?

    Learn how to utilize a financial calculator to calculate present value. Understand the necessary data, why it is important ... Read Answer >>
  2. Why is the time value of money (TVM) an important concept to investors?

    Understand why the time value of money is an important concept for investors. Learn when present value and future value calculations ... Read Answer >>
  3. How do investors calculate the present value of a future investment?

    Learn what present value is, how to calculate the present value of a future investment, and what formula investors use to ... Read Answer >>
  4. How is perpetuity used in determining the intrinsic value of a stock?

    Learn about the basics of a perpetuity, its valuation, how it is calculated and how it is used when evaluating the intrinsic ... Read Answer >>
  5. What is the difference between present value and net present value?

    Understand the difference between the present value and net present value calculations and how these formulas are used in ... Read Answer >>
  6. What is the difference between a company's book value per share and its intrinsic ...

    Book value and intrinsic value are two ways to measure the value of a company.In simple terms, book value is based on the ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center