Question

An analyst notices that a CEO has consistently achieved 5% growth in profits from one year to the next. The CEO's company currently has annual profits of $646,150. If the trend continues, what will the annual profits be in 10 years?

Answer 1

`\begin{gathered} A=P(1+(r)/(n))^(nt) \\ A=\text{?} \\ P=\text{ \$646,150} \\ r=0.05 \\ n=1 \\ t=10 \end{gathered}`
`\begin{gathered} A=646,150(1+(0.05)/(1))^(1*10) \\ \\ A=646,150(1+0.05)^(1*10) \\ A=646,150(1+0.05)^(10) \\ A=646,150(1.05)^(10) \\ A=646,150*1.62889 \\ A=1052510.263 \end{gathered}`

Summary:

The total amount accrued, principal plus interest, with compound interest on a principal of $646,150.00 at a rate of 5% per year compounded 1 times per year over 10 years is $1,052,510.26.