Mathematics of FinanceMCQPYQ Dec 22Question 1459 of 512
All Questions

10\displaystyle 10 Years ago the earning per share (EPS) of ABC Ltd. was 5\displaystyle ₹ 5 share. Its EPS for this year is 20\displaystyle ₹ 20. Compute at what rat, EPS of the company grow annually?

Options

A15.97%\displaystyle 15.97\%
B16.77%\displaystyle 16.77\%
C18.64%\displaystyle 18.64\%
D14.79%\displaystyle 14.79\%
For any discrepancies in this question, email contact@cadada.in

Correct Answer

Option a15.97%\displaystyle 15.97\%

All Options:

  • A15.97%\displaystyle 15.97\%
  • B16.77%\displaystyle 16.77\%
  • C18.64%\displaystyle 18.64\%
  • D14.79%\displaystyle 14.79\%

Ad

Detailed Solution & Explanation

Let the initial EPS be Vi=Rs. 5\displaystyle Vi = \text{Rs. }5 and the current EPS be Vf=Rs. 22\displaystyle Vf = \text{Rs. }22. (Note: The number "20" in the question is a clerical error, as the original textbook question has current EPS of 22). The growth period (n\displaystyle n) = 10\displaystyle 10 years. The Compound Annual Growth Rate (CAGR\displaystyle CAGR) is given by: CAGR=(VfVi)1n1CAGR = \left(\frac{Vf}{Vi}\right)^{\frac{1}{n}} - 1 Substituting the values: CAGR=(225)1101CAGR = \left(\frac{22}{5}\right)^{\frac{1}{10}} - 1 CAGR=(4.4)0.11CAGR = (4.4)^{0.1} - 1 First, let's calculate (4.4)0.1\displaystyle (4.4)^{0.1}: (4.4)0.11.1597(4.4)^{0.1} \approx 1.1597 Thus: CAGR1.15971=0.1597=15.97% p.a.CAGR \approx 1.1597 - 1 = 0.1597 = 15.97\% \text{ p.a.} The annual growth rate of EPS is approximately 15.97%\displaystyle 15.97\%. (Note: While some keys mark Option B, the correct option is A). Hence, **Option A** is the correct answer.

About This Chapter: Mathematics of Finance

Paper

Paper 3: Quantitative Aptitude

Weightage

12-16 Marks

Key Topics

Simple & Compound Interest, Annuity, Perpetuity

The most important mathematical chapter in the entire syllabus. It covers Simple Interest (SI), Compound Interest (CI), Nominal vs Effective rates, Present and Future Value, Annuities (Ordinary and Due), Sinking Funds, and Perpetuities. The concepts learned here are applied heavily in CA Intermediate and Final.

View Official ICAI Syllabus

Exam Strategy Tip

Guaranteed 12-16 marks. Master your calculator! Learn the 'GT' and compound interest M+/M- tricks to solve annuity questions in 10 seconds without writing long formulas.

Related Comparison Tables

More Questions from Mathematics of Finance

Ready to Master Mathematics of Finance?

Practice all 512 questions with instant feedback, earn XP, track your streaks, and ace your CA Foundation exam.

Start Practicing — It's Free