Question

Find both the arithmetic growth rate and the geometric growth rate of the dividends for Excellent Pizza Franchises. (Click on the following icon in order to copy its contents into a spreadsheet.) Year Dividend 2001 $1.49 2002 $2.49 2003 $3.29 2004 $4.47 2005 $5.53 2006 $6.65 2007 $7.04 2008 $8.32 2009 $7.62 2010 $6.79 What is the arithmetic growth rate of the dividends for Excellent Pizza Franchises? % (Round to two decimal places.)

Answer 1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

А Growth rate (g) (g+1) Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Dividend $1.49 $2.49 $3.29 $4.47 $5.53 $6.65 $7.04 $8.32 $7.62 $6.79 67.11% 32.13% 35.87% 23.71% 20.25% 5.86% 18.18% -8.41% -10.89% 167.11% 132.13% 135.87% 123.71% 120.25% 105.86% 118.18% 91.59% 89.11% Arithmetic growth rate Geometric growth rate 20.42% 18.36%

Cell reference -

Year Dividend Growth rate (g) (g+1) 2001 2002 1.49 2.49 3.29 4.47 4.47 5.53 6.65 2003 2004 2005 2006 2007 2008 2009 2010 =C4/C3-1 =C5/C4-1 =C6/C5-1 =C7/C6-1 =C8/C7-1 =C9/C8-1 =C10/09-1 =C11/C10-1 =C12/C11-1 =D4+1 =D5+1 =D6+1 =D7+1 =D8+1 =D9+1 =D10+1 =D11+1 =D12+1 7.04 8.32 7.62 6.79 Arithmetic growth rate =AVERAGE(D4:D12) Geometric growth rate=GEOMEAN(E4:E12)-1

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