Eckelberger Products Inc. makes high-speed recorders with high-speed scanning. The small company has been growing at an average rate of 70% per year for the past 4 years. The CEO asked you to convert the past growth rate into a daily rate for its annual report. If the past growth rate was an effective rate, what was the effective growth rate daily

Question

Business

Lena Harris

4 April, 01:32

Eckelberger Products Inc. makes high-speed recorders with high-speed scanning. The small company has been growing at an average rate of 70% per year for the past 4 years. The CEO asked you to convert the past growth rate into a daily rate for its annual report. If the past growth rate was an effective rate, what was the effective growth rate daily

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Answers (1)

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Jesus Moran · Answer 1

The effective growth rate daily is 0.1455%

Explanation:

The effective growth rate daily can be computed using the below daily growth rate formula:

effective daily rate = (1+annual rate) ^1/365-1

annual growth rate as given in the question is 70%

effective daily growth rate = (1+0.70) ^ (1/365) - 1

effective daily growth rate = 1.001454833 - 1

effective daily growth rate=0.001455

effective daily growth rate=0.145483327 %

effective daily growth rate = 0.1455% approximately

The fact that the business is growing at this rate on daily basis is good indicator of business success which must be leveraged upon in the future in order to take the business even to greater heights.

However, the validity of the annual rate of 70% is also very important, whatever parameters used in arriving at 70% needs to be rechecked in order to be on the safe side.