Question

Problem 5.27 (Solution Video) Sheridan Corp had sales of $327,000 in 2017. If management expects its sales to be $476,450 in 5 years, what is the rate at which the company's sales are expected to grow? (If you solve this problem with algebra round intermediate calculations to 4 decimal places, in all cases round your final answer to 2 decimal places, eg. 8.72%.) Growth rate

Answer 1

The current sales are $327,000. The expected sales in 5 years is $476,450. Calculate the growth rate. The formula used in excel is "RATE" and the value obtained is as follows: Function Arguments ? X RATE 1 - 5 Nper Pmt O Pv 327000 Fv 476450 Type o - 327000 = 476450 1 = 0.078186565 Returns the interest rate per period of a loan or an investment. For example, use 6%/4 for quarterly payments at 6% APR. Type is a logical value: payment at the beginning of the period = 1; payment at the end of the period = 0 or omitted. Formula result = 0.078186565 Help on this function Ok Cancel Thus, the growth rate is 7.82% Alternatively, Period Future value = Present value x(1+Rate) $476, 450=$327,000x(1+Rate) $476,450 = (1+Rate) $327,000 1.457034% = 1+ Rate Rate = 1.078187-1 = 0.078187 or 7.82%