Home Depot and Lowe\'s are the two largest home improvement retailers in the U.S

Question

Home Depot and Lowe's are the two largest home improvement retailers in the U.S. The following table shows the total revenue (in billions) for each retailer for the years 2008-2010 Year Home Depot Lowe's 77.35 71.29 66.18 2008 2009 2010 $48.28 48.23 47.22 SOURCE: Annual Reports of Home Depot, Inc., and Lowe's Companies Inc a. Calculate the growth rate for 2008-2009 and 2009-2010 for each retailer. (Negative values should be indicated by a minus sign Round your answers to 4 decimal places.) Home Depot Lowe's 2008-2009 2009-2010 b. Calculate the average growth rate for each retailer. (Negative values should be indicated by a minus sign. Do not round intermediate calculations. Round final answers to 3 decimal places.) Home Depot Lowe's Average growth rate

Explanation / Answer

Answer a.

Home Depot, Inc.:

2008-2009:

Growth Rate = (Revenue, 2009 / Revenue, 2008) - 1
Growth Rate = ($71.29 / $77.35) - 1
Growth Rate = 0.9217 - 1
Growth Rate = -0.0783 or -7.83%

2009-2010:

Growth Rate = (Revenue, 2010 / Revenue, 2009) - 1
Growth Rate = ($66.18 / $71.29) - 1
Growth Rate = 0.9283 - 1
Growth Rate = -0.0717 or -7.17%

Lowe’s Companies Inc.:

2008-2009:

Growth Rate = (Revenue, 2009 / Revenue, 2008) - 1
Growth Rate = ($48.23 / $47.22) - 1
Growth Rate = 1.0214 - 1
Growth Rate = 0.0214 or 2.14%

2009-2010:

Growth Rate = (Revenue, 2010 / Revenue, 2009) - 1
Growth Rate = ($47.22 / $48.23) - 1
Growth Rate = 0.9791 - 1
Growth Rate = -0.0209 or -2.09%

Answer b.

Home Depot, Inc.:

Average Growth Rate = (Growth Rate for 2008-2009 + Growth Rate for 2009-2010) / 2
Average Growth Rate = (-7.83% - 7.17%) / 2
Average Growth Rate = -7.50%

Lowe’s Companies Inc.:

Average Growth Rate = (Growth Rate for 2008-2009 + Growth Rate for 2009-2010) / 2
Average Growth Rate = (2.14% - 2.09%) / 2
Average Growth Rate = 2.50%

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