4. A firm's net income last year was $1.5 million. Its net income grew 5 percent during the last 5 years. If that growth rate continues, how long will it take for the firm's net income to double?

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PM.

To determine how long it will take for the firm's net income to double at a growth rate of 5 percent per year, we need to use the concept of the rule of 70.

The rule of 70 states that to determine the approximate doubling time, you divide 70 by the growth rate. In this case, the growth rate is 5 percent or 0.05.

Doubling time = 70 / Growth rate

Substituting the growth rate, we get:

Doubling time = 70 / 0.05 = 1400

Therefore, it will take approximately 1400 years for the firm's net income to double if the growth rate of 5 percent per year continues.