The newspaper reported last week that Tisch Enterprises earned $34.03 million th

Question

The newspaper reported last week that Tisch Enterprises earned $34.03 million this year. The report also stated that the firm’s return on equity is 12 percent. The firm retains 80 percent of its earnings.

What is the firm's earnings growth rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Earnings growth rate %

What will next year's earnings be? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, e.g., 1,234,567.)

Next year’s earnings $

Explanation / Answer

Earnings growth rate = 9.60%

Earnings growth rate = Return on Equity [ROE] x Firms Retention Ratio

= 12% x 0.80

= 9.60%             

Next year’s earnings = $37,296,880

Next year’s earnings = Current Year Earnings x [ 1 + g ]

= $34,030,000 x 1.09

= $37,296,880

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.