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5 November, 13:37

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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Answers (2)
  1. 5 November, 13:43
    0
    Answer: 719. 375M

    Explanation: This is a clear case of simple interest at a particular rate of interest over a period of time.
  2. 5 November, 13:58
    0
    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.
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Home » Business » 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.
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