Jarrett Corp.
At the end of 2010 Jarrett Corp. developed the following forecasts of net income:
$\begin{array}{c}
\begin{array}{l}
\
\text { Year } \
2011 \
2012 \
2013 \
2014 \
2015
\end{array}
\begin{array}{l}
\text { Forecasted}\
\text { Net Income}\
\$ 20,856 \
\$ 22,733 \
\$ 24,552 \
\$ 27,252 \
\$ 29,978
\end{array}
\end{array}$

Management believes that after 2015 Jarrett will grow at a rate of 7% each year. Total common shareholders' was $112,768 on December 31, 2010. Jarrett has not established a dividend and does not plan to paying dividends during 2011 to 2015. Its cost of equity capital is 12%.
-
What would be Jarrett's common shareholders' equity at the end of 2014?
A) $180,909
B) $208,161
C) $95,540
D) $112,768

Question

Jarrett Corp. 
At the end of 2010 Jarrett Corp. developed the following forecasts of net income:
$\begin{array}{c}
\begin{array}{l}
\
\text { Year } \
2011 \
2012 \
2013 \
2014 \
2015 
\end{array}
\begin{array}{l}
\text { Forecasted}\
\text { Net Income}\
\$ 20,856 \
\$ 22,733 \
\$ 24,552 \
\$ 27,252 \
\$ 29,978 
\end{array}
\end{array}$

Management believes that after 2015 Jarrett will grow at a rate of 7% each year. Total common shareholders' was $112,768 on December 31, 2010. Jarrett has not established a dividend and does not plan to paying dividends during 2011 to 2015. Its cost of equity capital is 12%.
-
What would be Jarrett's common shareholders' equity at the end of 2014?
A) $180,909
B) $208,161
C) $95,540
D) $112,768

Quizplus · Accepted Answer

To find Jarrett's common shareholders' equity at the end of 2014, we need to add the forecasted net income for each year from 2011 to 2014 to the initial shareholders' equity at the end of 2010. The initial equity is $112,768. The forecasted net incomes for 2011 to 2014 are $20,856, $22,733, $24,552, and $27,252, respectively. Adding these amounts to the initial equity gives us:$112,768 + $20,856 + $22,733 + $24,552 + $27,252 = $208,161.

Jarrett Corp Management Believes That After 2015 Jarrett Will Grow at a Developed