Growth rate: Vidmar Agencies is a fast-growing advertising agency. Currently, their sales are at $700,000. They expect their 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, their growth rate would slow down to 10 percent in years 8-10. What will be their sales as of year 10? (Round to the nearest dollar.)

Question

Quizplus · Accepted Answer

To calculate the sales for year 10, we need to use the compound interest formula: 
FV = PV × (1+r)n

PV = $700,000
For the first two years (n=2): r= 35%
For years 3 through 7 (n=5): r= 25%
For years 8 through 10 (n=3): r= 10%

Therefore, we can calculate the sales for each time period as follows:

Sales after 2 years: 
FV = $700,000 × (1+0.35)^2 = $1,247,250

Sales after 7 years: 
FV = $1,247,250 × (1+0.25)^5 = $3,396,693

Sales after 10 years: 
FV = $3,396,693 × (1+0.1)^3 = $5,181,956

Therefore, the answer is D) $5,181,956.

Growth Rate: Vidmar Agencies Is a Fast-Growing Advertising Agency