Five years ago you purchased an income generating asset for $50 thousand. You have been offered...
Five years ago you purchased an income generating asset for $50 thousand. You have been offered $100 thousand for the asset. The value of the asset has grown annually by approximately _____ percent. ?
Homework Answers
To calculate the annual growth rate of the asset's value, we can use the formula for compound annual growth rate (CAGR):
CAGR = (Ending Value / Beginning Value)^(1 / Number of Years) - 1
In this case: Beginning Value = $50,000 Ending Value = $100,000 Number of Years = 5
Plugging these values into the formula:
CAGR = ($100,000 / $50,000)^(1 / 5) - 1 = 2^(1 / 5) - 1 ≈ 0.37972966146
So, the approximate annual growth rate of the asset's value is approximately 37.97% (rounded to two decimal places).
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