Work Step by Step
Both terms have a $P$ value along with $(1+r)^2$. Therefore, $P(1+r)^2$ can be factored out to yield $P(1+r)^2(1+r)$. However, $(1+r)^2(1+r)=(1+r)^3$ through exponent rules, leaving $P(1+r)^3$.
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