Question

Manufic, a detergent manufacturer, has announced this year's net income as $832,500. It expects its net earnings to grow at a rate of 15 percent per year for the next two years, before dropping to 12 percent for each of the following two years. What is the firm's net income after four years? (Round to the nearest dollar.)

Answer 1

Answer:

$138,1071

Explanation:

Given that

Net income = $832,500

Growth rate = 15 percent

Growth rate = 12 percent

The computation of the net income after four years is shown below:

Net income after four years = Current year net income × (1 + growth rate)^number of years × (1 + growth rate)^number of years

= $832,500 × (1 + 0.15)^2 × (1 + 0.12)^2

= $138,1071