A business forecasts a growth rate of 10% per year. If its current revenue is $5

A business forecasts a growth rate of 10% per year. If its current revenue is $500,000, what will its revenue be in 2 years?

A business forecasts a growth rate of 10% per year. If its current revenue is $500,000, what will its revenue be in 2 years?

Step 1: Identify the current revenue, which is $500,000.
Step 2: Identify the growth rate, which is 10%. Convert this percentage to a decimal by dividing by 100, so 10% becomes 0.10.
Step 3: Determine the number of years for growth, which is 2 years.
Step 4: Use the formula for future revenue: future value = present value * (1 + growth rate)^number of years.
Step 5: Plug in the values: future value = $500,000 * (1 + 0.10)^2.
Step 6: Calculate (1 + 0.10), which equals 1.10.
Step 7: Raise 1.10 to the power of 2: (1.10)^2 = 1.21.
Step 8: Multiply the current revenue by this result: $500,000 * 1.21.
Step 9: Calculate the final result: $500,000 * 1.21 = $605,000.

Compound Growth Calculation – Understanding how to apply the compound growth formula to project future revenue based on a constant growth rate.