Question

A magazine ranks companies based on their overall percentage revenue growth over the previous three years. Last year, company A was ranked 5000 and had revenues that were 134% of what they were three years prior. By what percentage will you need to increase revenues per year to meet the mark set by company A (34% growth rate in three years) in order to give your company a good chance of making the list three years from now.

(product of n numbers)^(1/n)-1

Answer 1

I placed the formula I need to apply below, I'm a bit confused as to what the formula "means" as it applies to this problem

Answer 2

I'm sorry I'm not good with financial mathematics

Answer 3

okay :)

Answer 4

@mayankdevnani

Answer 5

@Kainui @Mehek14

Answer 6

where is the formula ?

Answer 7

(Product of n numbers)^(1/n) - 1 this was what I was given

Answer 8

also, is there a typo in this? I can't make sense of
company A had revenues that were 134% of what they were three years prior.
and the mark set by company A (34% growth rate in three years).
is that supposed to be 134% growth rate ??

Answer 9

I would think about this way.
we assume we grow at a rate, for example, 10% or as a decimal 0.1
that means if we start with x and grow 10% we do:
x+ 10% of x
or as a decimal:
x+0.1x
if we "factor out" the x, we can write it as x(1+0.1)
x is the amount we started with and after 10% grow we end up with x*1.1

if we don't know the rate, then let's give it a name "r"
x(1+r)
after the 2nd year: x(1+r)(1+r)
and the 3rd year: x(1+r)^3
and that equal x plus 134% of x or x+1.34x= 2.34x
so we have
\[ x(1+r)^3 = 2.34x\]
divide by x
\[ (1+r)^3 = 2.34\]
now take the cube root of both sides
1+r= (2.34)^(⅓)
finally
r= (2.34)^(⅓)-1

change the decimal to a percent for the final answer