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Dear John,
Please help me how we calculate this Q in detail.
Selling price is inflated at 3%
so sales figure Year 2 = Sales at Year 1 * 103% = 0.7 million * 103% = $721,000
Sales figure Year 3 = Sales at Year 2 * 103% = $721,000 * 103% = $742,630
I don’t understand the answer at the Revision Kit, Please advise
Thank you so much!!!The question asks for the sales revenue at time 2, not at time 3.
The sales units at time 2 are 1.6 million from the question.
What are you inflating the demand? It is the selling price that inflates, not the demand.
The selling price at time 2 will be $5 x 1.03^2
Therefore the sales will be 1.6M x $5 x 1.03^2
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