A company reported net income in 2012 of $314.5 million. In 2016 , the company expects...
A company reported net income in 2012 of $314.5 million. In 2016 , the company expects net income to be $578.6 million. Estimate the annual compound growth rate of net income.
The annual compound growth rate of net income is
Homework Answers
Let r or I/Y be annual compound growth rate.
Using future value formula , in 4 years net income changes from $314.5 million to $578.6 million.
Using financial calculator,
Future value (FV)= 578.6 million, Present value (PV) = 314.5 million , No. Of years (N)=4 Payment (PMT) = 0 CPT I/Y = 16.46%
Mathematically,
FV = PV*( (1+r)^n)
578.6 million = 314.5 million *((1+r)^4)
r = 16.46%
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