ACCA F5 query

mark057

Hello everyone,

I was wondering if somebody would be kind enough to explain what looks to be a simple problem I'm having with average growth model calculations?

Question

Year Sales Rev
2001 150,000
2002 192,000
2003 206,000
2004 245,000
2005 262,350

Sales in 2001 x (1 + g)4 = Sales in 2005

(1 + g)4 = $262,350/150,000 = 1.749

I'm fine up to this part but then the answer says

1 + g = 4 then what looks to be a square root symbol with the figure 1.749 inside = 1.15.

How are they calculating 1.15? I've tried various calculations and can't get it to work. Can anyone shed any light on this?

Mark

Richard

Hi Mark,

If you are using a scientific calculator press '4' then 'shift' and look for the key that has the square root symbol with a filled box on top, and a hollow box underneath! (sorry, I can't think of a better way to explain it!) then enter the 262,350/150,000 in the brackets. This will give you the answer of 1.15, which is an average growth of 15% each year.

Did you know there is now an ACCA forum on this website, called 'Further Studies'.