NISM Certifications · NISM-Series-XV: Research Analyst · Industry Analysis
An industry's total sales were Rs 800 crore in year 1 and Rs 1,152 crore in year 3, growing at a constant compound rate. If the growth continues at the same rate, what will sales be in year 4?
Sales in year 4 will be Rs 1,382.4 crore. The two-year growth factor is 1.44, so the annual compound rate is 20%. Multiplying year 3 sales of Rs 1,152 crore by 1.2 gives Rs 1,382.4 crore.
- ARs 1,300 crore
- BRs 1,382.4 croreCorrect
- CRs 1,440 crore
- DRs 1,344 crore
Explanation
Over two years growth is 1,152/800 = 1.44, so annual growth factor is 1.2 (20%). Year 4 sales = 1,152 x 1.2 = Rs 1,382.4 crore. Adding the average absolute increase of Rs 176 crore a year (simple growth) gives 1,328, which is wrong, and 1,440 wrongly applies 25%.
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