Question

Last year A.O. Smith Corporation reported sales of $469 million and this year it reported sales of $596 million. Assuming the growth rate in sales is expected to remain the same, what would be the forecast for next year's sales (in $ millions, rounded to one decimal place, e.g., \$12.3?) Estimate the growth rate in sales to two decimal places, e.g., 4.56%.

Answer 1

The growth rate in sales for A.O. Smith Corporation is approximately 27.08%. To forecast next year's sales with this growth rate, we multiply this year's sales by 1.2708, resulting in a forecast of approximately $757.4 million.

Step-by-step explanation:

To estimate the growth rate of sales for A.O. Smith Corporation, we can use the previous sales data provided. The growth rate can be calculated as the change in sales divided by the previous year's sales. Let's denote last year's sales as S1 and this year's sales as S2. The growth rate (G) can be calculated with the formula:

G = (S2 - S1) / S1 x 100%

By substituting the given values into the formula, we get:

G = ($596 million - $469 million) / $469 million x 100%
G = $127 million / $469 million x 100%

The calculated growth rate is approximately 27.08% (to two decimal places).

To forecast the next year's sales with the same growth rate, the formula is:

Next year's sales = S2 x (1 + G/100)

Next year's sales = $596 million x (1 + 27.08 / 100)

Next year's sales = $596 million x 1.2708

The forecast for next year's sales would be approximately $757.4 million (rounded to one decimal place).