## Present Value of Growth Opportunities (PVGO)

Most companies don’t remain the same size (i.e., have the same amount of earnings, net income) forever; with a soupçon of luck, a company’s earnings will grow, year after year. The value of a company’s opportunities to grow in the future is known, with no great originality, as the present value of growth opportunities (PVGO). Given the right information, calculating PVGO is trivial: it’s the difference between the (present) value of the company as is (i.e., including those growth opportunities) and the (present) value of the company assuming zero growth:

## Time Diversification & Impact on Capital Allocation Decisions: A Corporate Finance Perspective

In his recent article, What Practitioners Need to Know…About Time Diversification , Mr. Kritzman offers a comprehensive view on time diversification. As an example, Mr. Kritzman outlines the following…

## Marginal Cost of Capital: Break Points

Typically, the more capital a company wants to raise, the more expensive it will be for each additional increment; i.e., as its capital budget grows, its marginal cost of capital (MCC) increases. Because a company will undertake a project only when that project’s internal rate of return (IRR) is greater than the cost of capital needed to fund the project (alternatively: only when that project’s net present value (NPV) is positive when discounted at the cost of capital needed to fund that project), it is important for the company to know how its marginal cost of capital relates to its overall capital budget.

## Degree of Operating Leverage (DOL)

The degree of operating leverage (DOL) is defined as:

## Degree of Financial Leverage (DFL)

The degree of financial leverage (DFL) is defined as: