Shalit Corporation\'s 2008 sales were $6 million. Its 2003 sales were $3 million

Question

Shalit Corporation's 2008 sales were $6 million. Its 2003 sales were $3 million.

a. At what rate have sales been growing? Round your answer to the nearest hundredth.



b. Suppose someone made this statement: "Sales doubled in 5 years. This represents a growth of 100% in 5 years, so, dividing 100% by 5, we find the growth rate to be 20% per year." Is the statement correct?
-Select-The statement is correct because 100% divided by 5 equals 20%.The statement is incorrect because there are 6 years of sales growth between 2003 and 2008.The statement is incorrect because a company's sales cannot double in such a short time span.The statement is incorrect since the effect of compounding is not considered.The statement is correct since the effect of discounting is considered.Item 2

Explanation / Answer

a)

First you need to see that it took 5 years to get from 3 to 6 milion.

That you have to solve this formula

6milion =   3 milion * x5

x5 = 2

x = 1.15

So the grow was 15%

b)

The statement is incorrect since the effect of compounding is not considered.

In the first year, the profit is 1.04* 3 = 3.12

The year after that, also the 0.12 extra will deliver extra interest!

This is the same for the next years.

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