Continuous Compounding. Mark Greene, a control supervisor for County General, Inc., is concerned about an increase in distribution costs per unit from $24.50 to $25 over the last four years. Greene feels that setting up a new direct-sales distribution network at a cost of $27.50 per unit may soon be desirable.
A. Calculate the unit cost growth rate using the constant rate of change model with continuous compounding.
B. Forecast when unit distribution costs will exceed the current cost of direct-sales distribution.

Question

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The Answer of Continuous Compounding. Mark Greene, a control supervisor for County General, Inc., is concerned about an increase in distribution costs per unit from $24.50 to $25 over the last four years. Greene feels that setting up a new direct-sales distribution network at a cost of $27.50 per unit may soon be desirable.
A. Calculate the unit cost growth rate using the constant rate of change model with continuous compounding.
B. Forecast when unit distribution costs will exceed the current cost of direct-sales distribution.