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8 February, 16:28

Last year Thomson Inc's earnings per share were $3.50, and its growth rate during the prior 5 years was 11.0% per year. If that growth rate were maintained, how many years would it take for Thomson's EPS to triple?

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  1. 8 February, 19:24
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    10.52 years

    Explanation:

    We can work out the number of years using this relationship

    V = P * (1+r) ^n

    V = tribe valeu = 3*3.5 = 10.5

    r-growth rate - 11%

    n - number of years-?

    10.5 = 3.5 * (1.11) ^n

    dividing both sides by 1.11^n

    1.11^n = 10.5/3.5

    taking the log of both sides

    n log 1.11 = log 3

    n = log 3/log 1.11

    n = 10.52
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