A company has $840M revenue and 12% profit margin. If revenue grows 7% and margins expand to 14%, what is the new profit?

How to answer

Step by step: (1) New revenue = $840M x 1.07. Calculate: 840 x 1.07 = 840 + 840 x 0.07 = 840 + 58.8 = $898.8M. (2) New profit = $898.8M x 14% = $898.8M x 0.14. Calculate: 900 x 0.14 = $126M, minus 1.2 x 0.14 = $0.168M. So approximately $125.8M. (3) Original profit = $840M x 12% = $100.8M. (4) Profit increase = $125.8M - $100.8M = $25M, or about 25% increase. Key insight to share with interviewer: the 2-point margin expansion contributes more to profit growth ($18M) than the 7% revenue growth ($7M), demonstrating why margin improvement is the more powerful lever.

Key idea: $840M x 1.07 = ~$899M. Then $899M x 14% = ~$126M. Compare to original $101M.