Growth rate: Trojan Traps manufactures an innovative mouse trap. Sales this year are $325,000. The company expects its sales to go up to $500,000 in five years. What is the expected growth rate in sales for this company? (Round to the nearest percent.)
A) 9%
B) 11%
C) 6%
D) 12%

Question

Quizplus · Accepted Answer

The expected growth rate can be calculated using the formula for compound annual growth rate (CAGR): CAGR = [(Final Value/Initial Value)^(1/Number of Years)] - 1. Plugging in the values: CAGR = [(500,000/325,000)^(1/5)] - 1 ≈ 0.09 or 9%.

Growth Rate: Trojan Traps Manufactures an Innovative Mouse Trap