Question

The yearly profits of a company is $25,000. The profits have been decreasing by 6% per year.a. What is the initial value? $ b. What is the decay factor? c. What will be the profits in 8 years? Round your answer to the nearest dollar

Answer 1

The initial value is the initial profits of the company, so:

Answer a: $25,000

The decay factor is the percentage in what the profits have been decreasing, so:

Answer b: 6% or 0.06

Finally, the profits every year can be calculated as:

`\begin{gathered} \text{profits}=InitialValue(1-0.06)^t \\ \text{Profits}=25,000(1-0.06)^8 \\ \text{Profits}=25,000(0.609) \\ \text{Profits}=15,239 \end{gathered}`

Answer c: $15,239