An analyst estimates that XYZ’s earnings will grow from $3.00 a share to $4.50 per share over the next 8 years. The rate of growth in XYZ’s earnings is closest to: A. 4.9% B. 5.2% C. 6.7% D. 7.0% The answer is B. But, why does the solution to this question require that we input -3 (negative) as the PV?
it’s similar to investing in a bond with current price $3 and future value of $4.50 you can also just do (4.50/3)^(1/8)