Growth Rates

Sales for Hanebury Corporation's just-ended year were $20 million. Sales were $10 million 5 years earlier.

1. At what rate did sales grow? Do not round intermediate calculations. Round your answer to two decimal places.

   %

2. Suppose someone calculated the sales growth for Hanebury Corporation in part a as follows: "Sales doubled in 5 years. This represents a growth of 100% in 5 years; dividing 100% by 5 results in an estimated growth rate of 20% per year." Explain what is wrong with this calculation.

   choices-Select-The statement is incorrect since the effect of compounding is not considered.The statement is correct because 100% divided by 5 equals 20%.The statement is incorrect because there are 6 years of sales growth between initial and final years.The statement is incorrect because a company's sales cannot double in such a short time span.The statement is correct since the effect of discounting is considered.