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Brockman Corporation's earnings per share were $3.50 last year, and its growth rate during the prior 5 years was 11.6% per year. If that growth rate were maintained, how many years would it take for Brockman's EPS to triple?

Select the correct answer.

a. 12.41
b. 10.01
c. 2.81
d. 7.61
e. 5.21

Answer :

It  would take 10.01 years for Brockman's EPS to triple.

What is future value?

The future value of the current earnings per share of $3.50 is its future worth in future years if it continues to increase at its growth rate of 11.6%, hence, based on the future value formula for a single cash flow below, we can determine the number of years it takes the EPS to triple:

FV=PV*(1+r)^N

FV=tripled EPS=$3.50*3=$10.50

PV=present EPS=$3.50

r=annual growth rate=11.6%

N=number of years it takes EPS to triple=unknown

$10.50=$3.50*(1+11.6%)^N

$10.50/$3.50=(1+11.6%)^N

3=1.116^N

take log of both sides

ln(3)=N ln(1.116)

N=ln(3)/ln(1.116)

N=10.01

Find out more about future value of EPS on:brainly.com/question/16561271

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