Question

Following is information from Bava Industries for 2017.

Total 2017 revenue $2,471,300
Projected revenue growth rate, for next five years 3%
Terminal revenue growth rate, after year 5 1%
Net operating profit margin (NOPM) 6.4%
Net operating asset turnover (NOAT) 2.35
Projected 2019 total revenue would be:

Select one:
A. $2,751,485
B. $2,570,893
C. $2,621,802
D. $2,545,439
E. None of the above

Answer 1

The answer is c. $2,621,802

Step-by-step explanation:

Please find the below for detailed explanations and calculations:

As given in the question, the total revenue will be projected to grow at 3% annually from the year of 2017 to the year 2022.

Thus, with the total 2017 revenue is given at $2,471,300, we can calculate the projected total revenue of 2019 as followed:

Projected total revenue in 2018 = Total 2017 revenue x ( 1 + projected growth rate ) = $2,471,300 x ( 1+ 0.03) = $2,545,439;

Projected total revenue in 2019 = Total 2018 revenue x ( 1 + projected growth rate ) = $2,545,439 x ( 1+ 0.03) = $2,621,802.17

Thus the answer is c. $2,621,802 ( rounded to 0 decimal places).