Question

The sales data for the Lodestar Sport Apparel company for the last 12 years are as follow

Answer 1

Question #75691, Economics Microeconomics

Question: The sales data for the Lodestar Sport Apparel company for the last 12 years are as follow

Year Sales

2001 $400,000

2002 $440,000

2003 $480,000

2004 $518,000

2005 $554,000

2006 $587,000

2007 $617,000

2008 $654,000

2009 $700,000

2010 $756,000

2011 $824,000

2012 $906,000

a) What is the 2001 – 2012 compound growth rate?

b) Using the result obtained in part a, what is your 2013 projection?

c) If you were to make your own projection, what would you forecast?

Solution:

a) $CG = \left(\frac{V_0}{V_f}\right)^{\left(\frac{1}{n}\right)} - 1$

where $n$ is number of years, $V_f$ is final value and $V_o$ is original value

$$CG = \left(\frac{906000}{400000}\right)^{\left(\frac{1}{11}\right)} - 1 \approx 0.077157 \approx 7.7157\%$$

b) $906000 + (906000 * 7.7157\%) = \$975904$

c) I would project Lodestar Sport Apparel maintain steady growth with $7-8\%$ of CAGR, which means sales up to $\$1,4-1,6$ million within 5 years.

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