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-   -   Calculate growth rate (https://www.askmehelpdesk.com/showthread.php?t=178250)

  • Jan 29, 2008, 06:59 PM
    coolmandrew
    Calculate growth rate
    I am trying to calculate the earnings growth rate, the dividend growth rate and the stock selling price based on the following information:

    EPS
    2007 $1,200,000
    2002 $816,000

    Dividends per Share
    2007 $600,000
    2002 $420,000

    Book value per share
    2007 $9,000,000

    Total Assets
    2007 $20,000,000

    Total Debt
    2007 $11,000,000

    Sales
    2007 $37,000,000

    I do know that the EPS growth rate is 8% but have no idea how it was calculated. Can you help?
  • Jan 30, 2008, 08:17 AM
    ebaines
    Use the relationship:

    (Final Value)/(Initial value) = (1 + Avg Growth%)^N

    Where N is the number of years. You need to rearrange this to get the Avg Growth % by itself, which yields:

    Avg Growth % = (Final Value/Initial Value)^1/N - 1

    Now solve:

    Avg Growth % = (1,200,000/816,000)^1/5 -1 = 1.47^0.2 -1 = 8.01%
  • Sep 19, 2010, 07:20 AM
    godisgood1
    Annual dividend of $.75. Stock selling price for $10.90 a share and has a required return of 11%. What is the growth rate of the dividend?
  • Sep 21, 2010, 11:33 AM
    ebaines

    The return on stock depends on both the dividend and change in market price of the stock. So unless you know what happens to the stock price, you can't determine what you need for dividends in order to have a total return of 11%.

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