Forecasting and Demand

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2.
A) Fred's Hardware and Hobby House expects its sales to increase at a constant rate of 8 percent per year over the next three years. Currents sales are $100,000. Forecast sales for each of the next years.

1st year: 100,000 x 1.08=108,000
2nd year: 108,000 x 1.08=116,640
3rd year: 116,640x 1.08=125,971.20

B) If sales in 2004 were $60,000 and they grew to $100,000 by 2008 (a four year period), what was the actual annual compound growth rate?

The actual annual compound growth rate is found with the formula (FV/PV)^1/n - 1 where FV is the future value, PV is the present value, and n is the number of years. This gives us
(100,000/60,000)^1/4 - 1 =.136, or 13.6%

6. The economic analysis division of Mapco Enterprises estimated the demand functions for its line of weed trimmers as:
Q¬D= 18,000 + 0.4N - 350PM + 90PS
Where N = number of new ...