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In your finance courses, you learned concepts related to Present Value and Future Value. Starbucks' "Cash and Cash Equivalents" in 2013 was $2,575.7 million (page 47). Out of this cash amount of Starbucks decides to invest $575.7 million for 5 years at an interest rate of 5%, what would be the future value of $575.7 million?

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ahmedgodtrust

Answer:

Present value(PV) = $575.5

Interest rate(r)    = 5% = 0.05

No of years(n)    =  5 years

FV = PV(1+r)n

FV = $575.7(1+0.05)5

FV = $575.7(1.05)5

FV = $575.7 x 1.2763

FV = $734.77

Explanation:

Future value is equal to the product of present value and 1 + interest rate raised to power number of years. Since only $575.7 was invested for 5 years, we need to compound it for 5 years at an interest rate of 5% per annum.

Answer: 719. 375M

Explanation: This is a clear case of simple interest at a particular rate of interest over a period of time.

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