he annual revenue-growth rates for a new tech startup during its first 4 years of operations were as follows: year 1 +50% year 2 +50% year 3: -50% year 4- -50% Rounded to the nearest tenth of one percent, the startup's 4-year Compound Annual Growth Rate was
Answers
Given : annual revenue-growth rates for a new tech startup during its first 4 years of operations were as follows: year 1 +50% year 2 +50% year 3: -50% year 4- -50%
To find : the startup's 4-year Compound Annual Growth Rate
Solution:
Let say initial Revenue = R
After 1st year = R + (50/100)R = 1.5R
After 2nd year = 1.5R + (50/100)1.5R = 2.25R
after 3rd Year = 2.25R - (50/100)2.25R = 1.125R
After 4th years = 1.125R - (50/100)1.125R = 0.5625R
Compound Annual Growth Rate = r
0.5625R = R (1 + r/100)⁴
=> (1 + r/100)⁴ = 0.5625
=> 1 + r/100 = 0.866
=> r/100 = -0.134
=> r = -13.4%
startup's 4-year Compound Annual Growth Rate was -13.4%
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