Homework SourseGo For It Inc is in the process of forecasting the sales gro
Go For It, Inc. is in the process of forecasting the sales growth rate for their early-stage venture specializing in the production of durable running shoes. Go For It predicts a .2 probability of an 80% growth in sales, a .3 probability of a 60% growth in sales, a .4 probability of a 40% growth in sales, and a .1 probability of a 10% decrease in sales. What is the expected sales growth rate of the venture?
a. 47% b. 49% c. 51% d. 53%
Solution
0.80
| Probability (A) | Growth (B) | (A) x (B) |
| 0.2 | 0.80 | 0.2 x 0.8 = 0.16 |
| 0.3 | 0.6 | 0.3 x 0.6 = 0.18 |
| 0.4 | 0.4 | 0.4 x 0.4 = 0.16 |
| 0.1 | -0.1 | 0.1 x -0.1 = -0.01 |
| Expected sales growth = 0.16+0.18+0.16-0.01 = 0.49 or 49% |
