How do you calculate growth rate (historical growth in earnings) with a financial calculator? [Chapter...
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Finance
How do you calculate growth rate (historical growth in earnings) with a financial calculator?
[Chapter 9 - p.408 - #11 a) ]
The variables are as follows:
Current EPS: $6.50
EPS 5 years ago: $4.42
40% of earnings as dividends
Stock sells for $36
We are solving from growth rate which is I/Y on the financial calculator
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From these details, my thought would be:
N: 5
I/Y: [solving for this]
PV:
PMT:
FV:
The final answer is 8.02% for I/Y if you use the formula: EPS = previous EPS (1+g)^5 =>
$6.50 = $4.42(1+g)^5
What numbers do we fill in for the inputs above to calculate an I/Y of 8.02%?
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