Below is selected data for Gertup Corporation as of 12/31/05:
$$\begin{array} { l r }
\text { Total assets } & \$ 5,500 \
\text { Current assets } & 2,750 \
\text { Long-term debt } & 450 \
\text { Current ratio } & 2.5 \
\text { Inventory } & 1,500 \
\text { For year ended 12/31/05 } & \
\text { Sales } & \$ 18,500 \
\text { Cost of goods sold } & 14,800
\end{array}$$
-If sales increased by 10% per annum for the next 20 years, sales for year 2025 would be closest to:
A)$407,000.
B)$124,459.
C)$113,000.
D)$55,500.

Question

Below is selected data for Gertup Corporation as of 12/31/05:
 $$\begin{array} { l r } 
\text { Total assets } & \$ 5,500 \
\text { Current assets } & 2,750 \
\text { Long-term debt } & 450 \
\text { Current ratio } & 2.5 \
\text { Inventory } & 1,500 \
\text { For year ended 12/31/05 } & \
\text { Sales } & \$ 18,500 \
\text { Cost of goods sold } & 14,800
\end{array}$$
-If sales increased by 10% per annum for the next 20 years, sales for year 2025 would be closest to:
A)$407,000.
B)$124,459.
C)$113,000.
D)$55,500.

Quizplus · Accepted Answer

To find the sales for the year 2025 after increasing by 10% per annum for 20 years, we use the formula for compound growth: $$Future \ Value = Present \ Value \times (1 + rate)^{time}$$. Here, the present value is the sales for the year 2005, which is $18,500, the rate is 10% or 0.10, and the time is 20 years. So, $$Future \ Sales = 18,500 \times (1 + 0.10)^{20}$$. Calculating this gives a value close to $124,459.

Below Is Selected Data for Gertup Corporation as of 12/31/05