A manufacturer of LCD televisions has seen sales increase from 125,000 units per year to 500,000 units per year in 8 years.What has been the firm's average annual rate of increase in the number of television sets sold? Use the Rule of 72 to determine your answer.
A)The average annual rate of change has been between 10% and 11%.
B)The average annual rate of change has been between 18% and 19%.
C)The average annual rate of change has been between 15% and 16%.
D)There is not enough information to answer this question.

Question

Quizplus · Accepted Answer

To find the average annual rate of increase we use the formula:
[(Ending Value / Beginning Value)^(1/# of years) - 1] * 100

Plugging in the values we get:
[(500,000 / 125,000)^(1/8) - 1] * 100 ≈ 18.47%

Using the Rule of 72, we can estimate how long it will take for the sales to double. 
72 / 18.47 ≈ 3.89 years

Since these values fall between 18% and 19%, the best choice is B.

A Manufacturer of LCD Televisions Has Seen Sales Increase from 125,000