SOLUTION: If sales at ABC Company was $0.8 million in the first year of operation and is expected to increase annually at a rate of 6%.How much is sales expected to be in the 8 th year of

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Question 1111840: If sales at ABC Company was $0.8 million in the first year of operation and is
expected to increase annually at a rate of 6%.How much is sales expected to be in the 8
th year
of operation and what would be the total sales over ABC′
sfirst 10 years in business?
(Give answer in millions to 1 d. p)
Answer by Theo(13342) About Me  (Show Source):
You can put this solution on YOUR website!
this looks like a geometric progression.

the formulas for a geometric progression are:

An = A0 * r^(n-1)

Sn = A0 * (1 - r^n) / (1 - r)

in your problem:

A0 = .8 million.

r = 1.06

when n = 8 and A0 = .8 and r = 1.06, the formula for An becomes:

A8 = .8 * 1.06^7.

this results in A8 = 1.202904207 million.

round to 1 decimal place to get A8 = 1.2 million.

when n = 10 and A0 = .8 and r = 1.06, the formula for Sn becomes:

S10 = .8 * (1 - 1.06^10) / (1 - 1.06)

this results in S10 = 10.54463595 million.

round to 1 decimal place to get S10 = 10.5 million.

the amount of sales in the 8th year will be 1.2 million.

the total sales for the first 10 years will be 10.5 million.

the following excel spreadsheet shows the individual year by year calculations.

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