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In a company's first year in operation, it made an annual profit of $247,500. The
profit of the company increased at a constant 16% per year each year. How much
total profit would the company make over the course of its first 10 years of operation,
to the nearest whole number?

Respuesta :

linandrew41

To calculate this sort of problem:

 ⇒ involves calculating the total profits over each year

 ⇒ with a constant increase periodically

    ⇒ need to use the Compound Interest Equation

           [tex]A = P(1+\frac{r}{n})^{nt}[/tex]

  • A: total amount after t years
  • P: initial amount in account
  • r: rate per period
  • n: number of times the profit increases per year
  • t: number of years

Let's fill in some variables:

  • P: $247500
  • r: 16% increase (in equation form, we plugin 0.16)
  • n: 1 time per year
  • t: 10 years

What do we want to know:

  • A: total amount after 10 years

Let's solve:

    [tex]A= 247500*(1+\frac{0.16}{1} )^{1*10}=\\A=247500*(1+0.16)^{10}\\A=247500*(1.16)^{10} \\A= 1,091,830.18[/tex]

To the nearest whole number

  • Answer: $1,091,830

Hope that helps!

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