Question about the growth rate

Question

Could you please clarify why we divide 1.04 instead of multiplying it when calculating the number of first-grade students in the US? I would assume that with a positive growth rate, we should multiply to obtain the number of students who will buy the new textbook in the next year.

Answer 1

Hi there,

Thank you very much for this question. I would be happy to share the solution to it:

Since we want to calculate the number of children born 7 years ago, a number in the past, we need to divide by this positive growth rate instead of multiplying by it.

If you would like a more detailed discussion on how to best prepare for your upcoming interviews, please don't hesitate to contact me directly.

Best,

Hagen

Answer 2

Hi there,

Hagen is exactly right here.

This is a super rare situation and I personally have not seen this in a case. That said, it's good to know, and, most importantly, it's always good to practice how to react to a new thing mid-case…using logic and math fundamentals you could have tried to figure it out. Practice these scenarios as you are likely to get something you havenm't seen before, and therefor cannot solely rely on memorization!

Answer 3

Great to see that you already received a clarification for the question.

Sharing here a guide that you might find useful with the most common formulas and terms that show up in interviews:

Expert Guide: The Must-Know Consulting Terms for Interviews

Best,
Cristian

Answer 4

Because you are trying to take out the growth (to estimate a number in the past) istead of projecting growth to estimate a number in the future.