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    Annual/Actual Growth Rate

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    Acme Corporation sales were $6million in 1995 and $12 million in 2000. Since sales have grown 100% in 5 years the annual growth rate is 20% (100%/5). What's wrong with this calculation and what is Acme's actual annual growth rate?

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    Solution Preview

    The above scenario ignores the effect of compounding. Compounding ...

    Solution Summary

    The solution explains the correct way of calculation the growth rate.