itisSheldon wrote:
The Green Life company turned in a first-year profit of $5,000. In its second year, its profit is $8,000. If revenue grew 15% in that period while costs were constant, what were its second-year revenues?
(A) $15,000
(B) $20,000
(C) $23,000
(D) $26,500
(E) $27,800
Since profit = revenue - cost, we can let r = 1st-year revenue and c = 1st-year cost. Thus 1.15r = 2nd-year revenue and c = 2nd-year cost and we can create the following two equations:
5,000 = r - c
c = r - 5000
and
8,000 = 1.15r - c
Substituting, we have:
8,000 = 1.15r - (r - 5000)
8000 = 1.15r - r + 5000
3000 = 0.15r
20,000 = r
Since the first-year revenue is $20,000, the second-year revenue is 1.15 x 20,000 = $23,000.
Answer: C
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