how did they come by the growth rate that was used in the question
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June 2012 P4 question one
13y ago#1The PBIT have grown from 970 to 1230 over 3 years.
If they were growing at g per year, then after one year they would have grown to 970 x (1 + g); and after 2 years to 970 x (1+g)^2; and after 3 years to 970 x (1+g)^3.
So....970 x (1+g)^3 = 1230.
Solving this gives g - the past rate of growth per annum. The question says that it will reduce to 25% of the original rate for the foreseeable future, and so the growth rate to use is 25% x g (as calculated above).
If they were growing at g per year, then after one year they would have grown to 970 x (1 + g); and after 2 years to 970 x (1+g)^2; and after 3 years to 970 x (1+g)^3.
So....970 x (1+g)^3 = 1230.
Solving this gives g - the past rate of growth per annum. The question says that it will reduce to 25% of the original rate for the foreseeable future, and so the growth rate to use is 25% x g (as calculated above).
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