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June 2012 P4 question one

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › June 2012 P4 question one

  • This topic has 1 reply, 2 voices, and was last updated 12 years ago by John Moffat.
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  • November 26, 2012 at 5:19 pm #55663
    bobtett
    Member
    • Topics: 1
    • Replies: 0
    • ☆

    how did they come by the growth rate that was used in the question

    November 26, 2012 at 9:05 pm #108489
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54696
    • ☆☆☆☆☆

    The 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).

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