A company has plans to increase its sales at the rate of 6% per year. If the sales of the company in 2001 were $23 million, how much sales can you expect the company to make in the year 2003?
23 * 1.06^2 = $25.84 M
To calculate the sales of the company in the year 2003, we need to apply the given growth rate of 6% per year for two years to the initial sales in 2001.
First, let's find the sales increase for each year. We know that the growth rate is 6%, which can also be written as a decimal as 0.06.
To calculate the sales increase for the first year, we multiply the initial sales by the growth rate:
Sales increase in 2002 = $23 million × 0.06 = $1.38 million
Now, let's calculate the sales for 2002 by adding the sales increase to the initial sales:
Sales in 2002 = $23 million + $1.38 million = $24.38 million
Next, we repeat the same process to find the sales increase for the second year:
Sales increase in 2003 = $24.38 million × 0.06 = $1.46 million
Finally, we calculate the sales for 2003 by adding the sales increase to the sales in 2002:
Sales in 2003 = $24.38 million + $1.46 million = $25.84 million
Therefore, you can expect the company to make sales of approximately $25.84 million in the year 2003.