Jarrett Corp Management Believes That After 2015 Jarrett Will Grow at a Following

question 39

Multiple Choice

Jarrett Corp.
At the end of 2010 Jarrett Corp.developed the following forecasts of net income:
$\begin{array}{lccc}& \text {Forecasted } \\ \text { Year: }& \text { Net Income} \\2011&\$20, 856\\2012&\$22,733\\2013&\$24,552\\2014&\$27,252\\2015&\$ 29.978\\\end{array}$

Management believes that after 2015 Jarrett will grow at a rate of 7% each year.Total common shareholders' equity was $112,768 on December 31, 2010.Jarrett has not established a dividend and does not plan to paying dividends during 2011 to 2015.Its cost of equity capital is 12%.
-What would be Jarrett's common shareholders' equity at the end of 2014?

• A) $180,909
• B) $208,161
• C) $95,540
• D) $112,768

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Definitions:

Target Profit

The desired net income a firm aims to achieve within a specific time period.

Dollar Sales

The complete income derived from the sale of products or services, measured in units of currency.

Break-even

The point at which total costs and total revenue are equal, resulting in no net loss or gain, and where the business covers all its costs with its sales revenue.

Monthly Dollar Sales

The total value of sales measured in dollars that a business achieves in one month.