Final answer:
The growth rate of Shalit Corporation's sales from 2000 to 2005 is 100% over 5 years; however, the statement that the growth rate is a simple 20% per year is not accurate due to compounding effects. The correct method to find a consistent annual growth rate would be by using the Compound Annual Growth Rate (CAGR) calculation.
Step-by-step explanation:
To calculate the growth rate of Shalit Corporation's sales, we use the formula to find the percentage increase over the period. The growth rate is calculated by the change in sales divided by the original amount of sales and then multiplied by 100 to get a percentage. The sales increased by $6 million over 5 years (from $6 million in 2000 to $12 million in 2005). Therefore, the growth rate is ($12 million - $6 million) / $6 million * 100 = 100% over 5 years.
The statement 'Sales doubled in five years. This represents a growth of 100% in 5 years, so dividing 100 percent by 5, we find the growth rate to be 20% per year.' is not technically accurate because it assumes simple linear growth rather than compound growth. To maintain a consistent growth rate over multiple periods, a phenomenon known as compound growth must be taken into account. When the base increases, the absolute change that corresponds to the same percentage growth becomes larger. In this case, a growth of 100% over 5 years does not necessarily mean that the growth rate is a constant 20% each year.
Using the Compound Annual Growth Rate (CAGR) formula, which accounts for the compounding effect, would provide a more accurate growth rate per year.