USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

-Refer to Exhibit 4.3. Calculate the average annual rate of change for GB Industries for the five-year period using the geometric mean.
A) 9.7800%
B) 0.0978%
C) 9.0700%
D) 0.0970%
E) 3.6400%

Question

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
 
-Refer to Exhibit 4.3. Calculate the average annual rate of change for GB Industries for the five-year period using the geometric mean.
A) 9.7800% 
B) 0.0978% 
C) 9.0700% 
D) 0.0970% 
E) 3.6400%

Quizplus · Accepted Answer

To calculate the geometric mean rate of change, we use the formula:

[(End Value/Beginning Value) ^ (1/Number of Years)] - 1

Using the given data in Exhibit 4.3, we have:

[(82.25/53.75) ^ (1/5)] - 1 = 0.0978 or 9.7800%

Therefore, the correct answer is A) 9.7800%.