Question

How to calculate 5 year average growth rate for JetBlue? Growth rate of gross margin was 4.70% per share.

Answer 1

growth rates are simply expressed as the difference between two values in time in terms of a percentage of the first value.

In this problem given data is Present growth rate on gross margin =4.7%

Average Growth rate= ((Present -Past )^1/n)-1

lets take past gross margin = 100

The Present gross margin =104.7 (4.7% growth rate means 100 to 104.7 increased margin)

n in equation means period = 5 years

Average growth rate = ((104.7-100)^1/5)-1)/5

=((4.7^.20)-1)/5

=1.36271/5

=.3627/5

=0.0725 ie 7.25%