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.)

Question

Quizplus · Accepted Answer

To calculate the firm's net income after four years, we apply the growth rates to the initial net income of $832,500. For the first two years, the net income grows at 15% per year, and for the next two years, it grows at 12% per year.Year 1: $832,500 * (1 + 0.15) = $957,375Year 2: $957,375 * (1 + 0.15) = $1,101,981.25Year 3: $1,101,981.25 * (1 + 0.12) = $1,234,219.80Year 4: $1,234,219.80 * (1 + 0.12) ≈ $1,381,071Rounded to the nearest dollar, the firm's net income after four years is approximately $1,381,071.

Manufic, a Detergent Manufacturer, Has Announced This Year's Net Income