Last year Thomson Inc's earnings per share were $3.50,and its growth rate during the prior 5 years was 9.6% per year.If that growth rate were maintained,how many years would it take for Thomson's EPS to triple?

Question

Quizplus · Accepted Answer

To solve the problem, we can use the formula for calculating the years to reach a certain target value:

Years = log(Target Value/Starting Value) / log(1+Growth Rate)

In this case, the target value is three times the starting value (i.e., EPS of $3.50), so Target Value = Starting Value x 3 = $10.50.

Plugging in the values, we get:

Years = log(10.5/3.5) / log(1+0.096) = 11.98 years (rounded to two decimal places)

Therefore, it would take about 11.98 years for Thomson's EPS to triple if its current growth rate of 9.6% were maintained. The closest option is C) 11.98.

Last Year Thomson Inc's Earnings Per Share Were $3