Coca-Cola\'s worldwide sales as of December 31, 2011, was 26.7 billion cases. As

Question

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% 1490 12% 9% 890 21% 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 Italy in 2053 (42 years from 2011) would be approximately billion cases. (Note: For this question, ignore other factors that affect sales.)

Explanation / Answer

This question requires the application of compounding formula, which is:

FV = PV * (1 + r)n

Question 1

In 2011, sales in Italy were = 26.7 bil * 9% = 2.403 bil

Growth rate for future 42 years is 10.26%

Hence, sales in 2053, FV = 2.403 * (1 + 10.26%)42 (Using same formula mentioned above)

FV = 2.403 * 60.4722 = 145.3146

Question 2

For growth rates during different periods,

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

1936 - 1939: 4,500,000 = 1,000,000 * (1 + r)3 => 4.5 = (1 + r)3 => 1.6510 = (1 + r) => r = 65.10%

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

Question 3

PV = 4,500,000, r = 79.28%, n = 6

FV = 4,500,000 * (1 + 79.28%)6

FV = 4,500,000 * 33.204050

FV = 149,418,225.7 --> Answer

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