Suppose a developer is interested in building a new apartment community. Through her market research, the developer has determined that the target market segment potential in year 1 consists of 100 households. The developer believes that the target market segment potential will grow by 5% annually over the next five years. If the developer projects a capture rate of 25% for each of the next five years, but is only to sell 26 apartment units in each of the next five years, in which year will her actual sales first fail to meet her projected sales numbers?
A) Year 2
B) Year 3
C) Year 4
D) Year 5

Question

Quizplus · Accepted Answer

In Year 3, the target market segment potential is 110.25 households (100 * 1.05^2), and the capture rate of 25% results in 27.56 potential sales, which exceeds the 26 units she can sell.

Suppose a Developer Is Interested in Building a New Apartment