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A firm projects its revenue to rise 20% in each of the next 3 years. At the same time, it projects costs to rise 10% each year. If profit this past year was Rs 10Cr on revenue of Rs 100 Cr, what will be the accumulated profit at the end of the 3rd year?

Solution

✅ Correct Option: 1

Given: Revenue =Rs 100= Rs\ 100 Cr, Profit =Rs 10= Rs\ 10 Cr

Cost =100−10=Rs 90= 100 - 10 = Rs\ 90 Cr

Revenue grows at 20%20\% per year, Cost grows at 10%10\% per year.


Year 1:

Revenue =100×1.2=120= 100 \times 1.2 = 120

Cost =90×1.1=99= 90 \times 1.1 = 99

Profit =120−99=21= 120 - 99 = 21


Year 2:

Revenue =120×1.2=144= 120 \times 1.2 = 144

Cost =99×1.1=108.9= 99 \times 1.1 = 108.9

Profit =144−108.9=35.1= 144 - 108.9 = 35.1


Year 3:

Revenue =144×1.2=172.8= 144 \times 1.2 = 172.8

Cost =108.9×1.1=119.79= 108.9 \times 1.1 = 119.79

Profit =172.8−119.79=53.01= 172.8 - 119.79 = 53.01


Accumulated Profit =21+35.1+53.01= 21 + 35.1 + 53.01

=109.11= 109.11

≈Rs 109.1\approx Rs\ 109.1 Cr

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