Net Present Value Of Growth Opportunities - NPVGO


DEFINITION of 'Net Present Value Of Growth Opportunities - NPVGO'

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).


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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.

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  1. What are the disadvantages of using net present value as an investment criterion?

    While net present value (NPV) calculations are useful when you are valuing investment opportunities, the process is by no ... Read Full Answer >>
  2. What's the difference between net present value and internal rate of return? How ...

    Both of these measurements are primarily used in capital budgeting, the process by which companies determine whether a new ... Read Full Answer >>
  3. Which is a better measure for capital budgeting, IRR or NPV?

    In capital budgeting, there are a number of different approaches that can be used to evaluate any given project, and each ... Read Full Answer >>
  4. Can working capital be depreciated?

    Working capital as current assets cannot be depreciated the way long-term, fixed assets are. In accounting, depreciation ... Read Full Answer >>
  5. Do working capital funds expire?

    While working capital funds do not expire, the working capital figure does change over time. This is because it is calculated ... Read Full Answer >>
  6. Do you discount working capital in net present value (NPV)?

    Net present value (NPV) calculations should include the discounted value of changes in working capital. This treatment of ... Read Full Answer >>

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