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Homework answers / question archive / Seven years ago, 5G-phone Inc

Seven years ago, 5G-phone Inc

Management

Seven years ago, 5G-phone Inc. earned $1.50 per share. Its earnings this year were $5.20. What was the growth rate in earnings per share (EPS) over the 7-year period?

a.14.07%

b.16.69%

c.18.49%

d.19.43%

e.16.36%

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Computation of Growth Rate:

Present Value = Past Value*(1+Growth Rate)^n

So, 

Growth Rate = (Present Value/Past Value)^(1/n) - 1

= ($5.20/$1.50)^(1/7) - 1

= 3.47^(1/7) - 1

= 1.1943 - 1

Growth Rate = 0.1943 or 19.43%


So, the correct option is D "19.43%".

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