Question

Bovic Inc. is a growing company with sales of $1.25 million this year. The company expects to grow at an annual rate of 25 percent for the next three years, followed by a growth of 20 percent per year for the next two years. What will be Bovic's sales at the end of five years? (Round to the nearest percent.) a. $1,875,000 b. $2,160,000 c. $2,929,688 d. $3,515,625

Answer 1

Answer:

The correct answer is D.

Explanation:

Giving the following information:

Bovic Inc. is a growing company with sales of $1.25 million this year. The company expects to grow at an annual rate of 25 percent for the next three years, followed by a growth of 20 percent per year for the next two years.

First, we need to calculate the growth in sales for the first three years using the following formula:

FV= PV*(1+i)^n

FV= 1,250,000*(1+0.25)^3= $2,441,406.25

Now, using the same formula, we can calculate the following two years:

FV= 2,441,406.25*1.20^2= $3,515,625