Locil Agencies is a fast-growing advertising agency. Currently, its sales is at $700,000. The company expects its sales to grow at an annual rate of 35 percent in the next two years, followed by an annual rate of 25 percent in years 3 through 7. Finally, its growth rate would slow down to 10 percent in years 8-10. What will its sales be in year 10? (Round to the nearest dollar.)

Question

Quizplus · Accepted Answer

To calculate the sales in year 10, we need to determine the growth rate for each of the 10 years and apply it to the current sales figure.

Year 1: $700,000 
Year 2: $700,000 x 1.35 = $945,000 
Year 3: $945,000 x 1.25 = $1,181,250 
Year 4: $1,181,250 x 1.25 = $1,476,562.50 
Year 5: $1,476,562.50 x 1.25 = $1,845,703.13 
Year 6: $1,845,703.13 x 1.25 = $2,307,128.91 
Year 7: $2,307,128.91 x 1.25 = $2,883,911.14 
Year 8: $2,883,911.14 x 1.10 = $3,172,302.25 
Year 9: $3,172,302.25 x 1.10 = $3,489,532.47 
Year 10: $3,489,532.47 x 1.10 = $3,838,485.71

Therefore, the sales in year 10 would be approximately $5,181,956, or answer choice D.

Locil Agencies Is a Fast-Growing Advertising Agency