multistep increase or decrease

Question

In the year 2001, a company made $7.2 million in profit. For each consecutive year after that, their profit increased by 11%. How much would the company's profit be in the year 2005, to the nearest tenth of a million dollars?



Answer 1

This is an example of exponential growth. At the end of each year, you will have 1.11 times the profit you had at the start of the year.

P(n) = P₀ (1.11)ⁿ

P₀ = initial profit = 7.2 million

n = number of years elapsed from when the profit was 7.2 million

P(n) = (7.2 million) (1.11)ⁿ

In 2005,

n = 2005 - 2001 = 4

Plug n=4 into the equation for P(n) and evaluate.