H 43 237 SELFEVALUATION 1 Find the growth rate and forecast

H* (43%) 2:37 SELF-EVALUATION 1. Find the growth rate and forecast production for the succeeding three years: Year Sales (In thousands) 1991 1992 1993 1994 1995 32,500 uuts 40,200 units 51,300 units 62,400 units 74,800 urats 2. Given the 7 years sales figures beiow, project sales for the year 1997, 1998 and year 2000. Year Sales (In thousands) 1989 1990 1991 1992 993 1994 1995 115.5 126,8 139.4 152.2 169.3 185.7 208.89 3. ABC Corporation is a developer whose business is to buy land, construct townhouses, and then sell it through the GSIS, SSS or Pag-ibig Plan. During the past 5 years, the firm has shown an average growth rate of 20% in its operations in Metro Manila. This firm wants o explore the possbulty of doing m other urban centers in the Visayas and Mindanao. Can it use the same average growth rate method in those areas too? Why? Why not? the same business in Submit your written reports to your professor 69 perial Business Ecomomics

Solution

Year

Sales

1991

32,500

1992

40200

1993

51300

1994

62400

1995

74800

Finding the CAGR for this table we get CAGR (the average growth rate) to be as 23.16% .

Using it to forecast further sales we get the table as

1996

92123.68

1997

113459.5

1998

139736.8

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2.The given table is

Year

Sales

1989

115.5

1990

126.8

1991

139.4

1992

152.2

1993

169.3

1994

185.7

1995

208.89

Finding the CAGR for this table we get CAGR(the average growth rate) to be as 10.37%.

Using it to forecast further sales we get the table as

1996

230.5519

1997

254.4601

1998

280.8476

1999

309.9715

2000

342.1156

From this table forecast for years 1997, 1998, and 2000 can be seen easily.

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3. ABC Corporation should not use the same average growth rate method in other urban centers as it has used in Metro Manila. If it uses the same growth rate method it is highly probable to make incorrect forecasts and thus incorrect business decisions. There could be several factors on which growth rate of company would depend such as-

And many other such reasons may exist which would influence the construction costs, selling costs and prices of the finished products. Therefore ABC corp should make detailed study of these factors in new areas and then forecast its sales accordingly rather than blindly following Manila’s growth rate.

Year		Sales
1991		32,500
1992		40200
1993		51300
1994		62400
1995		74800