Calculate the total number of copies that the publisher expects to sell in

Calculate the total number of copies that the

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10 percent in the fourth year. Calculate the total number of copies that the publisher expects to sell in years 3 and 4. Draw a time line to show the sales level for each of the next four years. Solution: Number of copies sold in its first year = PV = 53,250 Expected annual growth in the next 3 years = i = 20% Number of copies sold after 3 years = FV 3 = copies 92,016 = × = + × = 3 n n ) 20 . 1 ( 250 , 53 ) 1 ( PV FV i Number of copies sold in the fourth year = FV 4 copies 101,218 = × = + × = ) 10 . 1 ( 016 , 92 ) 1 ( PV FV n n i 0 3 4 years ├───────────┼────────┤ PV = 53,250 92,016 10,218 copies 5.18 Growth rate : CelebNav, Inc., had sales last year of $700,000, and the analysts are predicting a good year for the start up, with sales growing 20 percent a year for the next three years. After that, the sales should grow 11 percent per year for another two years, at 14
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which time the owners are planning on selling the company. What are the projected sales for the last year of the company’s operation? Solution: 0 1 2 3 4 5 years ├───────┼────────┼───────┼────────┼───────┤ g 1 = 20% g 2 = 11% PV = $700,000 FV=? Sales of CelebNav last year = PV = $700,000 Expected annual growth in the next 3 years = g 1 = 20% Expected annual growth in years 4 and 5 = g 2 = 11% Sales in year 5 = FV 5 .16 $1,490,348 = = + + = 2 3 2 2 3 1 5 ) 11 . 1 ( ) 20 . 1 ( 000 , 700 $ ) g 1 ( ) g 1 ( PV FV 5.19 Growth rate : You decide to take advantage of the current online dating craze and start your own Web site. You know that you have 450 people who will sign up immediately, and through a careful marketing research and analysis you determine that membership can grow by 27 percent in the first two years, 22 percent in year 3, and 18 percent in year 4. How many members do you expect to have at the end of four years?
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