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NISM Certifications · NISM-Series-XV: Research Analyst · Fundamentals of Research

Over three years, the revenue of an Indian company grew from Rs 200 crore to Rs 266.2 crore, growing at a constant annual rate. An analyst uses the same compound rate to project revenue for the next two years. What is the projected revenue at the end of year 5 (in Rs crore)?

Revenue grew by a factor of 1.331 over three years, which equals 1.1 cubed, so the compound annual growth rate is 10%. Growing Rs 266.2 crore for two more years at 10% gives 266.2 times 1.21, which is Rs 322.102 crore.

  1. A322.102Correct
  2. B354.9
  3. C293.0
  4. D399.3

Explanation

Growth factor over 3 years = 266.2/200 = 1.331 = 1.1^3, so CAGR is 10%. Year 5 revenue = 266.2 x 1.1^2 = 266.2 x 1.21 = 322.102. Adding 10% once gives 292.8, and using a simple average growth of 11.03% gives wrong values.

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