The newspaper reported last week that Bennington Enterprises earned $34.07 milli

Question

The newspaper reported last week that Bennington Enterprises earned $34.07 million this year. The report also stated that the firm’s return on equity is 16 percent. Bennington retains 75 percent of its earnings.

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

What will next year's earnings be? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Round your answer to the nearest whole number, e.g., 32.)

The newspaper reported last week that Bennington Enterprises earned $34.07 million this year. The report also stated that the firm’s return on equity is 16 percent. Bennington retains 75 percent of its earnings.

Explanation / Answer

Earning's growth rate:

= Return on equity*Retention rate

= 16%*75%

= 12%

Next year's earnings:

= $34.07 million*(1+12%)

= $3,815,840

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