Answer:
$ 1,965,334
Step-by-step explanation:
Annual sales of company in 1999 = $ 1,200,000
Geometric mean growth rate = 10.37 % = 0.1037
In order to forecast we have to use the concept of Geometric sequence. The annual sales of company in 1999 constitute the first term of the sequence, so:
[tex]a_{1}=1,200,000[/tex]
The growth rate is 10.37% more, this means compared to previous year the growth factor will be
r =1 + 0.1037 = 1.1037
We have to forecast the sales in 2004 which will be the 6th term of the sequence with 1999 being the first term. The general formula for n-th term of the sequence is given as:
[tex]a_{n}=a_{1}(r)^{n-1}[/tex]
So, for 6th term or the year 2004, the forecast will be:
[tex]a_{6}=1,200,000(1.1037)^{6-1}\\\\ a_{6}=1,965,334[/tex]
Thus, the forecasted sales for 2004 are $ 1,965,334
