Baggos has seen its EPS increase from $0.30 to $3.16 in seven years. What has been the growth rate of Baggos's EPS?
A) about 30%
B) about 40%
C) about 20%
D) about 10%

Question

Quizplus · Accepted Answer

To calculate the growth rate of EPS, we use the formula:

Growth rate = [(Ending value/Beginning value)^(1/number of years)] - 1

Plugging in the given values:

Growth rate = [(3.16 / 0.30)^(1/7)] - 1
Growth rate = 1.398 -1
Growth rate = 0.398 or 39.8%

Rounding to the nearest 10%, the growth rate of Baggos's EPS is about 40%. Therefore, choice B is the best answer.

Baggos Has Seen Its EPS Increase from $0