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  3. consider the following summary information about t

Consider the following summary information about the financial performance of ABC Ltd, a mature company,...

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Accounting

Consider the following summary information about the financial performance of ABC Ltd, a mature company, for the fiscal years ending 31st December 2015 - 31st December 2019. The rate of income tax is 30% over this time period, except for 2019, when the government provided a one time tax relief of 10%.

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Ms Always Optimistic, the CEO, projected net profit to grow uniformly to $1,956 in 2024, based on the companys recent strong earnings growth.

Required:

  1. What earnings growth rate did Ms Always Optimistic assume?
  2. Is this earnings growth rate reasonable given the data you have? The average earnings growth rate of ABC Ltds industry is 4.8% over the last 5 years.
  3. If you do not believe that the above earnings forecast is reasonable, what would be a more realistic earnings forecast, in your opinion?
2015 2019 EBIT Less: Tax NPAT $1,000 $300 2016 $1,050 $315 $735 2017 $1,103 $331 $772 2018 $1,158 $347 $810 $1,216 $243 $972 $700

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