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3 October, 01:14

Brockman Corporation's earnings per share were $3.50 last year, and its growth rate during the prior 5 years was 9.0% per year. If that growth rate were maintained, how many years would it take for Brockman's EPS to triple

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  1. 3 October, 01:37
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    12.75 years

    Explanation:

    Solution

    Recall that:

    The earnings of Brockman Corporation per share is = $3.50

    The growth rate in 5 years = 9.0%

    Now,

    We apply this formula which is stated below:

    A=P (1+r/100) ^n

    P = present value

    n = period of time

    r = the rate of interest

    Thus,

    (3*3.5) = 3.5 * (1.09) ^n

    3 = (1.09) ^n

    By applying long on either side we have the following

    log 3=n*log (1.09)

    n=log 3/log (1.09)

    Approximately, this is equal to = 12.75 years

    Therefore, it will take Brockman's EPS to triple in 12.75 years.
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