# Growth rate of Janebury Corporation

Sales for Janebury Corporation's just-ended year were $8 million. Sales were $4 million 2 years earlier.

a. At what rate did sales grow? Round your answer to the nearest whole.

Suppose someone calculated the sales growth for Janebury Corporation in part a as follows: "Sales doubled in 2 years. This represents a growth of 100% in 2 years, so, dividing 100% by 2, we find the growth rate to be 50% per year." Explain what is wrong with this calculation

Georgia-Pacific invests $8 million to buy a tract of land and plant some young pine trees. The trees can be harvested in 11 years, at which time G-P plans to sell the forest at an expected price of $16 million. What is G-P's expected rate of return? Round your answer to two decimal places.

To complete your last year in business school and then go through law school, you will need $40,000 per year for 4 years, starting next year (that is, you will need to withdraw the first $40,000 one year from today). Your rich uncle offers to put you through school, and he will deposit in a bank paying 4.26% interest a sum of money that is sufficient to provide the 4 payments of $40,000 each. His deposit will be made today.

a. How large must the deposit be? Round your answer to the nearest cent.

b. How much will be in the account immediately after you make the first withdrawal? Round your answer to the nearest cent.

c. How much will be in the account immediately after you make the last withdrawal? Round your answer to the nearest cent.

Your company is planning to borrow $850,000 on a 5-year, 14%, annual payment, fully amortized term loan. What fraction of the payment made at the end of the second year will represent repayment of principal? Round your answer to two decimal places.

Assume that you sold a house on December 31, and to help close the sale you took a second mortgage in the amount of $50,000 as part of the payment. The mortgage has a quoted (or nominal) interest rate of 6%, but it calls for payments every 6 months, beginning on June 30, and is to be amortized over 5 years. Now, 1 year later, you must inform the IRS and the person who bought the house about the interest that was included in the two payments made during the year.

a. To the closest dollar, what is the total amount of interest that was paid during the first year?

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#### Solution Preview

1. Georgia-Pacific problem:

Present value PV = 8,000,000

Future value FV = 16,000,000

Time period n = 11 yr

Expected rate of return (i) = ?

FV = PV(1 + i)^n

(1 + i)^11 = FV/PV = 16,000,000 / 8,000,000 = 2

1 + i = 2^(1/11) = ...

#### Solution Summary

Problems based on growth rate are solved. The calculations for Georgia-Pacific invests are provided.