Your forecast shows $500,000 annually in sales for each of the next 3 years.If your second and third year predictions have failed to incorporate 2.5% expected annual inflation,how far off in total dollars is your 3-year forecast?
A) $37,813
B) $50,000
C) $52,550
D) $76,250

Question

Quizplus · Accepted Answer

The correct answer is A because the total sales for the 3 years is $1,500,000. If the second and third year predictions have failed to incorporate 2.5% expected annual inflation, then the total sales for the 3 years should be $1,500,000 * 1.025^2 = $1,537,813. Therefore, the 3-year forecast is off by $1,537,813 - $1,500,000 = $37,813.

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