Google Answers Logo
View Question
Q: Revenue Problem ( Answered 5 out of 5 stars,   3 Comments )
Subject: Revenue Problem
Category: Science > Math
Asked by: tralcva-ga
List Price: $35.00
Posted: 18 Aug 2006 21:52 PDT
Expires: 17 Sep 2006 21:52 PDT
Question ID: 757538
It's a differential equation of sorts, but beyond not sure
what else to do.

Because of a slump in the economy, a company finds that its annual
revenue has  dropped from 742,000  in 1998 to 632,000 in 2000. if the
revenue is following  an exponential pattern of decline, what is the
expected revenue for 2002? (t=0 in 1998)
Subject: Re: Revenue Problem
Answered By: elmarto-ga on 19 Aug 2006 08:12 PDT
Rated:5 out of 5 stars
If revenue follows an exponential pattern of decline, we should be
able to characterize it with a function of the form:

Revenue(t) = A * e^(c * t)

t is time
c is a decay parameter
A is the level of sales at t = 0

So, first of all, why does A represent the revenue at t = 0? If we
plug t = 0 into the equation, we get:

Revenue(0) = A * e^(c * 0)
Revenue(0) = A * e^0
Revenue(0) = A * 1
Revenue(0) = A

Therefore, we've found that in the Revenue(t) equation, A = 742,000
(the revenue of the company when t = 0)

We know that 2 years later (at t = 2), revenue has become 632,000. So
now we can use this information to find c, the missing parameter:

Revenue(2) = 742000 * e^(c * 2)
632000   = 742000 * e^(c * 2)
632/742  = e^(c * 2)
ln(632/742) = c * 2
c = ln(632/742) / 2
c = -0.0802299...

Therefore, we've found that the revenue function is:

Revenue(t) = 742000 * e^(-0.0802299 * t)

Now, what's the expected revenue for year 2002? In this case, t = 4.
Therefore, we simply plug t = 4 into our equation, getting:

Revenue(4) = 742000 * e^(-0.0802299 * 4)
Revenue(4) = 538307.33

Expected revenue for year 2002 is thus 538,307.33

I hope this helps! If you have any doubt regarding my answer, please
don't hesitate to request clarification before rating it. Otherwise, I
await your rating and final comments.

Best wishes!
tralcva-ga rated this answer:5 out of 5 stars

Subject: Re: Revenue Problem
From: borisshah-ga on 18 Aug 2006 22:04 PDT
Subject: Re: Revenue Problem
From: tralcva-ga on 18 Aug 2006 22:05 PDT
It's actually part of a study guide for a final exam
Subject: Re: Revenue Problem
From: peguy97-ga on 21 Aug 2006 15:53 PDT
A much simpler way to think of it would be to simply calculate the
compound annual growth rate. [ (Current value / Previous value) ^ ( 1
/ n-years) -1 ]

Therefore, from 1998 to 2000 the annualized rate is -7.7%.  Using this
figure, the revenue estimate for 2002 is $538.3K.

Important Disclaimer: Answers and comments provided on Google Answers are general information, and are not intended to substitute for informed professional medical, psychiatric, psychological, tax, legal, investment, accounting, or other professional advice. Google does not endorse, and expressly disclaims liability for any product, manufacturer, distributor, service or service provider mentioned or any opinion expressed in answers or comments. Please read carefully the Google Answers Terms of Service.

If you feel that you have found inappropriate content, please let us know by emailing us at with the question ID listed above. Thank you.
Search Google Answers for
Google Answers  

Google Home - Answers FAQ - Terms of Service - Privacy Policy