NPVGO (Net Present Value of Growth Opportunities)

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What is NPVGO (Net Present Value of Growth Opportunities)?

NPVGO (Net Present Value of Growth Opportunities) is a valuation model which calculates the Net Present Value of all future cash flows of one or more potential projects, assets, investments or acquisitions.

Calculating NPVGO. Formula

NPVGO is calculated by taking the net cash inflow of the investments, discounted at the firm's Cost of Capital. From this amount is deducted the purchase price of the new investments.

You can use the formula of Net Present Value to calculate NPVGO.

Usage of NPVGO. Applications

• The Net Present Value of Growth Opportunities (NPVGO) model is used to determine the intrinsic value of one, a group, or all new projects, assets, investments or acquisitions at a given point in time, based on projected cash inflows.
• By calculating the Net Present Value of Growth Opportunities, an organization or an investor can determine if and how much the new investments will add to the value of the existing firm.
• NPVGO can help to determine an appropriate purchase price for the new investments.

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Compare with: NPV  |  Relative Value of Growth  |  P/E Ratio

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