The value of the future growth opportunities of a firm can be determined considering the firm's potential earnings from reinvesting current earnings in new projects that will eventually earn a rate of return in excess of the cost of equity capital.

Future Growth Opportunities

Potential avenues or prospects that can lead to an expansion of a business's operations and an increase in its profitability.

Cost of Equity Capital

The return that investors require for an investment in a company's equity, reflecting the compensation for taking on equity risk.

Rate of Return

The gain or loss on an investment over a specified period, expressed as a percentage of the investment’s cost.