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The newspaper reported last week that Tisch Enterprises earned $34
The newspaper reported last week that Tisch Enterprises earned $34.05 million this year. The report also stated that the firm's return on equity is 15 percent. The firm retains 85 percent of its earnings.
What is the firm's earnings growth rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Earnings growth rate 12.75
Numeric Response
Edit Unavailable. 12.75 correct.
%
What will next year's earnings be? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.)
Next year's earnings
Expert Solution
Computation of Firm's Earnings Growth Rate:
Earnings Growth Rate = Return on Equity [ROE] * Firms Retention Ratio
= 15% * 0.85
= 12.75%
Computation of Next Year's Earnings:
Next Year's Earnings = Current Year Earnings * (1 + Growth Rate)
= $34,050,000 * (1+12.75%)
= $38,391,375
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