Question #24
Reading: Reading 14 Financial Statement Modeling
PDF File: Reading 14 Financial Statement Modeling.pdf
Page: 14
Status: Unattempted
Question
Victor Mendoza is an equity analyst for LLT Partners, a private wealth management firm. Mendoza is currently valuing Testo Inc, a seller of smart phones. While reviewing the financials, Mendoza collects sales information of two of Testo's popular models as indicated below (figures in $ millions): Year 20x1 20X2 20X3 Alpinex 88.9 92.3 97.5 Bemax 0 54 433 The annual growth rate for both models combined from 20x1 to 20x3 is closest to:
Answer Choices:
A. 144%
B. 496%
C. 44%
Explanation
Combined sales in 20X1 = 88.9. Combined sales in 20X3 = 97.5 + 433 = 530.5.
Annual growth rate = [530.5 / 88.9]1/2 -1 = 1.44 or 144%