$4.703 billion for the firm in 10 years and a
compounded revenue growth rate of 46.98 percent.- Theotherapproachistoforecasttheexpectedgrowth
rate in revenues over the next three to five years
based on past growth rates. Once you estimate
revenues in year 3 or 5, you can then forecast a
growth rate based on companies with similar
revenues currently. For instance, assume that the
onlinetoy retailer analyzedhad revenuegrowth of
200 percent last year (revenues went from $33
millionto$100million).Youcouldforecastgrowth
ratesof 120 percent, 100 percent, 80 percent,and 60
percentforthenextfouryears,leadingtorevenuesof
$1.267billioninfouryears.Youcouldthenlookat
theaveragegrowthrateposted byretailfirmswith
revenuesbetween$1and$1.5billion lastyearand
use that as the growth rate commencing in year 5.
ILLUSTRATION 4.10: Estimating Revenues at Sirius
Satellite Radio
Inearlierillustrations,wehadconsideredSirius,thesatellite
radiopioneer.Inthefollowingtable,weforecastrevenuesfor
the firm for the next 10 years.
Year Revenue Growth Rate (%)Revenues ($millions)
Current 187
1 200 562
2 100 1,125