Net Present Value Of Growth Opportunities - NPVGO

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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.