Thirty years ago, the American town of Westfield began repossessing farms lost by their owners as a result of non-payment of taxes. To date the town has
planted some 3,600 acres of community forest on some of this land. The pine trees have grown well. The town forest ylelded the equlvalent of £100,000 net
profit on pulpwood last year and £95,000 the year before. Local authorities believe that the net profit on the pulpwood will continue to grow and eventually
reach £300,000 a year from just the present 3,600 acres.
5)
Westfield's town forest will yield an annual net profit of £300,000 from the present 3,600 acres within two or three years.
O A) True
B) Probably True
Insufficient Data
D) Probably False
E) False
Answers
Answer:
a -true is the answer
Explanation:
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Answer:
False
Explanation:
Looking at the forecasted net profit for 3 years, we can conclude that the net will not reach $300000 in the next 2 or 3 years
Step-by-Step explanation
Using the Straight-line Method of Forecasting, the net-profit will not be able to reach $ 3000000 within 2 to 3 years.
Solution:
Growth Rate= (Current Net profit- Previous Net Profit)/Net Profit
Growth Rate= (1000000−950000) / 950000
Growth Rate=0.0526 or 5.26%
Use the formula to find the forecasted net profit for the following year:
0.0526= (Current Net Profit−1000000) / 1000000
Current Net Profit=(1000000)(0.0526)+1000000
Current Net Profit=1052600
Use the formula to find the forecasted net profit for the 2nd year:
0.0526= (Current Net Profit−1052600) / 1052600
Current Net Profit=(1052600)(0.0526)+1052600
Current Net Profit=1107966.76
Use the formula to find the forecasted net profit for the third year:
Current Net Profit=(1107966.76)(0.0526)+1107966.76
Current Net Profit=1166245.812
Looking at the forecasted net profit for 3 years, we can conclude that the net will not reach $300000 in the next 2 or 3 years.