Your forecast shows $500,000 annually in sales for each of the next three years.If your second and third year predictions have failed to incorporate 5 percent expected annual inflation, how far off in total dollars is your three-year forecast?
A)$25,000
B)$50,000
C)$52,550
D)$76,250

Question

Quizplus · Accepted Answer

The inflation over three years would be:
Year 1: 0%
Year 2: 5%
Year 3: 5%

To calculate the impact on sales, we need to add 5% to the sales forecast for year 2 and year 3.
Year 1: $500,000
Year 2: $500,000 x 1.05 = $525,000
Year 3: $500,000 x 1.05 x 1.05 = $551,250

Total sales over three years would be: 
$500,000 + $525,000 + $551,250 = $1,576,250

The difference between the forecast without inflation and with inflation is: 
$1,500,000 (original forecast) - $1,576,250 (forecast with inflation) = $76,250

Therefore, the correct answer is D.

Your Forecast Shows $500,000 Annually in Sales for Each of the Next