Question

Five years ago, Weed Go Inc. earned $1.50 per share. Its earnings this year were $3.20. What was the growth rate in earnings per share (EPS) over the 5-year period

Answer 1

Growth rate = 16.36%

Step-by-step explanation:

The growth in EPS can be worked out using the average growth rate method.

Under this method the earliest EPS and the latest EPS are compared and average growth over the 5 years period is worked out.

This can be done using the formula below:

g= (EPSn/EPSo)1/n - 1

g - growth rate in EPS

EPSn- latest EPS

EPSo- Oldest EPS

n- number of years

g=(3.20/1.50)^1/5 - 1

g= 1.163621518 - 1

g= 0.163621518 × 100

g= 16.36%

Growth rate = 16.36%