Exercise 5.2

Fred's Hardware and Hobby House expects its sales to increase at a constant rate of 8 percent per year over the next three years. Current sales are $500,000.

Complete the following table by forecasting sales for each of the next three years.

Year	Forecasted Sales
	(Dollars)
1
2
3

If sales in 2003 were $300,000 and they grew to $500,000 by 2007 (a four-year period), the actual annual compound growth rate was:

10.76%

13.62%

18.56%

Which of the following are some of the hazards of employing a constant rate of growth forecasting model? Check all that apply.

It assumes that there are no cyclical variations.

It ignores seasonal trends.

It is ill-suited to estimate secular trends.