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    Mentor, Knowledge Varsity ratankv's Avatar
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    Solution for Question # 2

    Q2 Answer is B

    Check the Video Solution Q#2 below:



    Text Solution for Question #2 is below

    CAGR is the rate at which the EPS has grown.
    Please see the timeline below

    Easily we can solve this with the financial calculator
    So, the number of periods from 2002 to 2008 is equal to 6, therefore N = 6
    The parameters of TVM are :
    FV = -$14; PV = $5; PMT = 0; N=6; I/Y =?
    CPT -> I/Y =>I/Y = 18.72%
    So, the EPS has grown at an average rate of 18.72% for the 6 years.

    Note that you will get option A as the answer when you mistakenly take n = 7, so ensure that you input correct data.
    You will get error in your calculator, when you dont take PV and FV values having opposite sign.

    Thanks
    Ratan
    Quote Originally Posted by ratankv View Post
    Today's Question (Questions and answers provided by Knowledge Varsity)
    ================================================== ================================================== ============
    Q2. A Firm's EPS was $5 in 2002, In year 2008 the EPS was $14. Find the compounded annual growth rate (CAGR) of the EPS.
    A. 15.85 %
    B. 18.7 %
    C. Can’t be determined from the given options
    Attached Thumbnails Attached Thumbnails Click image for larger version. 

Name:	Q2 Timeline.JPG 
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