Question

In 2003, the annual sales at a company are $372,000. If sales are increasing at a rate

of 5% per year, in what year will the company's sales reach $1,000,000?

Answer 1

20 years

Explanation:

We start by writing an exponential equation;

FV = PV( 1 + r)^t

FV is the future value = 1,000,000

PV is present value = 372,000

r is rate = 5% = 5/100 = 0.05

t is time which we are looking for

1,000,000 = 372,000(1 + 0.05)^t

1.05^t = 1,000,000/372,000

1.05^t = 2.688

t ln 1.05 = ln 2.688

t = ln 2.688/ln 1.05

t = 20 years