Growth rates Sawyer Corporation\'s 2015 sales were $8 million. Its 2010 sales we
ID: 2811752 • Letter: G
Question
Growth rates Sawyer Corporation's 2015 sales were $8 million. Its 2010 sales were $4 million a. At what rate have sales been growing? Round your answer to two decimal places. b. Suppose someone made this statement: "Sales doubled in 5 years. This represents a growth of 100% in 5 years, so, dividing 100% by 5, we find the growth rate to be 20% per year." is the statement correct? -Select- The statement is correct because 100%, divided by 5 equals 20%. The statement is incorrect because there are 6 years of sales growth between 2005 and 2010. The statement is incorrect because a company's sales cannot double in such a short time span. The statement is incorrect since the effect of compounding is not considered The statement is correct since the effect of discounting is considered.Explanation / Answer
A.Given:
Time Period= 5 years
Present Value (PV)= $4,000,000
Future Value (FV)= $8,000,000
= $4,000,000(1+growth rate)^5= $8,000,000
Growth rate= 2^1/5-1 = 14.87%
The sales has been growing at 14.87%
This can also be calculated by using a financial calculator and inputting the following:
N=5; PV= $4,000,000; FV= $8,000,000
b.The statement is incorrect. It ignores the compound growth which is continuous.
Therefore, the answer is option 4.
I hope that was useful :)
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.