Calculating the value of the land

Gravestone Inc.
New answer on Aug 22, 2019
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Miles
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asked on Aug 21, 2019

I understand the solution of how to calculate the value of the land but how would you calculate this in the interview without a calculator? Am I missing a trick?

100,000*(1.04)^54=831,381.43

Thanks!

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Vlad
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replied on Aug 21, 2019
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School

Hi,

It's easy if you know the Rule of 72 (and I recommend learning one for the interview). The rule of 72 helps you to calculate how many times the investment actually doubles:

1) 72 / 4 = 18 - you divide 72 or 71 or 70 by the % growth

2) 54 / 18 = 3 - you divide years by the number you got in 1

3) 1000*(2)ˆ3 = ±800k - you double the investment exactly the number of times you got in 2

Best!

Best!

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Ivan replied on Aug 22, 2019

1.04^54 = 1.04^(2*3*3*3) = ((( 1.04^2 )^3) ^3)^3

1.04^2 = 1.08

1.08^3 = 1.26

1.26^3 = 2

2^3 = 8

100k * 1.08^54 = 100k * 8 = 800k (approximation)

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Vlad

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