Question

acme corp. plans to expand its relationship with a soft drink manufacturer to make acme ready-to-drink coffee beverages available in asia. the company wants to set aside $50 million now in its investment fund for the possible expansion 6 years from now. how much will the company have in its investment account at the end of year 6, if the company earns a rate of return of 8% per year?

Answer 1

Acme Corp. will have approximately $79.38 million in its investment account at the end of year 6 if it earns a yearly return rate of 8% on its initial $50 million investment, thanks to compound interest.

Step-by-step explanation:

Acme Corp. is looking to expand its operations in Asia, and the financial planning involves setting aside funds for future investment. To determine how much the company will have at the end of year 6, we can use the formula for compound interest: A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest, P is the principal amount, r is the annual interest rate (decimal), n is the number of times that interest is compounded per year, and t is the time the money is invested for in years.

For this scenario, since interest is compounded annually, we have P = $50 million, r = 0.08 (8%), n = 1, and t = 6 years. Plugging these values into the formula, we get: A = $50,000,000(1 + 0.08/1)^(1*6) = $50,000,000(1.08)^6.

Calculating the power of 1.08 to the 6th power and then multiplying by $50,000,000 gives us A ≈ $79.38 million (using a calculator or financial software to get an accurate result). This is the amount Acme Corp. will have in its investment account at the end of year 6.