Target, Inc. earned $2.00 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?
We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.
3.2=2*(1+r/100)^5
(3.2/2)^(1/5)=(1+r/100)
(1+r/100)=1.0986
r=1.0986-1
=9.86%(Approx).
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