Company info: …2000…2007 Sales…$149.7 million…$220.0 million Return on assets…10%…12% Net profit margin…6%…7% Number shares outstanding…5 million…6 million Sales in 2008 are expected to grow to grow at the historical compound annual growth of sales from the year 2000 to 2007. For the year 2008, the net profit margin and the number of shares outstanding are expected to remain unchanged from the year 2007. The company’s earnings per share (EPS), for the year 2008, is closest to: A. $2.74 B. $2.77 C. $4.69 D. $4.75 Answer is B, Can anyone demonstrate that? Thanks a lot
I don’t get B - here is how I’d work it out: growth rate: FV = 220, PV = 149.7 n = 7 solve for i = 5.65% Therefore 2008 expected sales = 220 * 1.0565 = 232.44 mil Net profit = 232.44 * 7% = 16.27 mil EPS = 16.27 / 6 = $2.72
That’s what I got too…
maybe 2.77 has a typo and supposed to be 2.71…