Pharmacist John S. Pemberton invented a soft drink in 1886 that eventually becam

Question

Pharmacist John S. Pemberton invented a soft drink in 1886 that eventually became not only an integral part of everyday life in the United States but also a symbol of consumerism worldwide. In 1929 the first Coca-Cola vending machines were installed in Germany, and in 1930, the German branch of the Coca-Cola Co. opened in Essen Germany was a growing market for Coca-Cola, along with other countries in Europe, before World War II With the previous data given, calculate the company's sales growth rate for each time period in the following table Growth Rate Coca-Cola sales in Germany were 243,000 cases in 1934, 1 million cases in 1936, and 4.5 million cases in 1939 Years 1934-1936 1936-1939 1934-1939 (Source: "Coca-Cola GmbH and World War Two," www.gettherealfacts.co.uk/docs/gmbh.pdf) During World War II, Coca-Cola Co. cut off all syrup sales to Germany in 1940, resulting in no sales from 1943 to 1945. If Coca-Cola's sales had grown from 1939 to 1945 at the same rate that they grew between 1934 and 1939, its sales in 1945 would have been approximately present value.) cases. (Hint: Use sales data from 1939 as the Coca-Cola's worldwide sales as of December 31, 2011, was 26.7 billion cases. Assume the following sales distribution: Unit Case Volume Eastern Europe Germany Spain Great Britain Italy France Other 20% 16% 14% 12% 996 8% If Coca-Cola's worldwide growth were to continue at the same growth rate as it did in Germany between 1939 and 2008, when sales grew at the rate of 10.26%, its hypothetical sales in Eastern Europe in 2053 (42 years from 2011) would be approximately billion cases. (Note: For this question, ignore other factors that affect sales.)

Explanation / Answer

Part 1: Growth rates for different periods

In order to calclulate growth rates for the different periods, we will use the time value of money function: FV = PV * (1 + r)n

For 1934-1936: 1,000,000 = 243,000 * (1 + r)2 => 4.1152 = (1 + r)2 => 2.0286 = (1 + r) => r = 1.0286 = 102.86%

For 1936-1939: 4,500,000 = 1,000,000 * (1 + r)3 => 4.5000 = (1 + r)3 => 1.6510 = (1 + r) => r = 0.6510 = 65.10%

For 1934-1939: 4,500,000 = 243,000 * (1 + r)5 => 18.5185 = (1 + r)5 => 1.7928 = (1 + r) => r = 0.7928 = 79.28%

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Part 2: Fill in theblanks

Again we would use the time value of money function: FV = PV * (1 + r)n

n here would be 6 years; r (as calculated above) = 79.28%

FV = 4,500,000 * (1 + 0.7928)6

FV = 149,396,355.13 ---> Answer

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This question would again apply the time value of money function:

FV = PV * (1 + r)n

FV = 26.7 bil * (1 + 0.1026)42

FV = 26.7 bil * 60.4722

FV = 1,614.61 bil ---> Answer

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This question would apply time value of money function, with daily compounding.

FV = PV * (1 + r)n

r = 16% --> Annually --> 16%/365 = 0.0438% (daily)

n or number of days = (9/12) * 365 = 273.75 days

FV = 23,000 * (1 + 0.0438%)273.75

FV = 23,000 * 1.1275

FV = $25,931.75 ---> Closest to option 2, which is the answer

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