Question

An analyst notices that a CEO has consistently achieved 5% growth in profits from one yearto the next. The CEO's company currently has annual profits of $955,000. If the trendcontinues, what will the annual profits be in 9 years?If necessary, round your answer to the nearest cent.

Answer 1

EXPLANATION

This is a Growth Function Model, thus we can use the following expression:

`f(t)=a(1+r)^t`

Where r represents the rate, t the time and a the initial amount.

Substituting terms:

`f(t)=955,000(1+0.05)^9`

Adding numbers:

`f(t)=955,000\cdot1.05^9`

Computing the power:

`f(t)=955,000\cdot1.5513`

Multiplying numbers:

`f(t)=1481518.45`

In conclusion, the annual profit in 9 years will be of $ 1,481,518.45