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A firm has a stock of $100 per share, a cost of equity of 10%, and expected earnings per share of $4. Is the value
A firm has a stock of $100 per share, a cost of equity of 10%, and expected earnings per share of $4. Is the value of the stock primarily coming from the current earnings of the stock or from the present value of growth opportunities (PVGOs)? Holding all else equal, is this stock less risky or riskier, as an investment, than a stock whose value comes completely from the current earnings of the firm?
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