Question

Your company currently has sales of $200,000, but you expect to have $500,000 in sales in 5 years. What rate do you expect sales to grow by each year?

Answer 1

The annual growth rate expected for the company's sales, going from $200,000 to $500,000 in 5 years, is 20% per year. This is calculated using the compound annual growth rate (CAGR) formula.

Step-by-step explanation:

To calculate the annual growth rate of your company's sales over a period of 5 years (from $200,000 to $500,000), we need to use the formula for compound annual growth rate (CAGR), which is:

CAGR = (Ending value/Beginning value)^(1/number of years) - 1

In this case:

• Ending value = $500,000
• Beginning value = $200,000
• Number of years = 5

Applying these values to the formula:

CAGR = ($500,000/$200,000)^(1/5) - 1

First, divide $500,000 by $200,000 to get 2.5. Next, take the fifth root of 2.5, which is approximately 1.20, and then subtract 1 to get the CAGR. The percentage change in sales per year is therefore:

CAGR = 1.20 - 1 = 0.20 or 20%

The expected growth rate in sales per year is 20%.

Answer 2

The sales will grow at the rate of 20.11% each year.

Step-by-step explanation:

This problem requires us to calculate the growth rate of sales. The growth can easily be calculated using following formula.

Growth = (Future Value/Current value)^ (1/n)-1

Growth = (500,000/200,000) ^ (1/5) -1

Growth = 20.11 %