Genor Peterson Electrical Supplies has generated a net income of $161,424 this year. The firm expects to see an annual growth of 30 percent for the next five years, followed by a growth rate of 15 percent for each of the next three years. What will be the firm's expected net income in eight years? (Round to the nearest dollar.)
A) $319,157
B) $241,329
C) $911,546
D) $689,259

Question

Quizplus · Accepted Answer

To calculate the expected net income in eight years, we first apply the 30% annual growth rate for the first five years and then the 15% growth rate for the next three years. Starting with a net income of $161,424:1. After 1 year (30% growth): $161,424 * 1.30 = $209,851.202. After 2 years (30% growth): $209,851.20 * 1.30 = $272,806.563. After 3 years (30% growth): $272,806.56 * 1.30 = $354,648.534. After 4 years (30% growth): $354,648.53 * 1.30 = $461,043.095. After 5 years (30% growth): $461,043.09 * 1.30 = $599,356.01Now, applying the 15% growth rate for the next three years:6. After 6 years (15% growth): $599,356.01 * 1.15 = $689,259.417. After 7 years (15% growth): $689,259.41 * 1.15 = $792,648.328. After 8 years (15% growth): $792,648.32 * 1.15 = $911,545.57Rounding to the nearest dollar, the expected net income in eight years is $911,546.

Genor Peterson Electrical Supplies Has Generated a Net Income of $161,424