Wildwoods, Inc.earned $1.50 per share five years ago.Its earnings this year were $3.20.What was the growth rate in earnings per share (EPS) over the 5-year period?

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Quizplus · Accepted Answer

The growth rate can be calculated using the formula for compound annual growth rate (CAGR), which is: $$CAGR = \left(\frac{FV}{PV}\right)^{\frac{1}{n}} - 1$$ where FV is the future value ($3.20), PV is the present value ($1.50), and n is the number of periods (5 years). Plugging in the values gives: $$CAGR = \left(\frac{3.20}{1.50}\right)^{\frac{1}{5}} - 1 \approx 0.1636$$ or 16.36%.