Suppose that a companys sales were 5000000 three years ago S

Suppose that a company\'s sales were $5,000,000 three years ago. Since that time sales have grown at annual rates of 10 percent, – 10 percent, and 25 percent.

Find the geometric mean growth rate of sales over this three-year period. (Round your answer to 2 decimal places. Omit the \"%\" sign in your response.)

Find the ending value of sales after this three-year period. (Do not round intermediate calculations and round your final answer to nearest dollar amount. Omit the \"$\" sign in your response.)

Solution

a)

Here,

(1+ Rg)^3 = (1+0.10)(1-0.10)(1+0.25)

(1+ Rg)^3 = 1.2375

1 + Rg = 1.073614585

Rg = 0.073614585 or 7.36% [ANSWER]

***************

b)

A = 5,000,000 (1+0.10)(1-0.10)(1+0.25)

= 6187500 [ANSWER]