Sawyer Corporation's 2018 sales were $7 million. Its 2013 sales were $3.5 million. At what rate have sales been growing? Round your answer to two decimal places. % Suppose someone made this statement: "Sales doubled in 5 years. This represents a growth of 100% in 5 years; so dividing 100% by 5, we find the growth rate to be 20% per year." Is the statement correct

A. Annual average growth rate=((last value/First value)^(1/Time between 1st and last value)-1)*100

Annual Growth rate=((7/3.5)^(1/5)-1)*100

Annual Growth rate% = 14.87

B. The statement is correct since the effect of compounding is not considered

Explanation:

1.

A = P(1+r/100) ^ n

A = future value     P = present value  r = rate of interest  n =time period.

7 = 3.5 x (1+r/100)^5

(7/3.5)^(1/5) = (1+r/100)

(1+r/100) = 1.1487

r = 1.1487-1

= 14.87%

2.The correct option is:

The statement is incorrect since the effect of compounding is not considered.

The statement is incorrect because effect of compounding ie 'interest on interest' factor is not considered in this case.

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