Ask Question
17 September, 10:48

You want to endow a scholarship that will pay $ 5 000 per year forever, starting one year from now. If the school's endowment discount rate is 10 % , what amount must you donate to endow the scholarship?

+5
Answers (1)
  1. 17 September, 13:26
    0
    You must donate $50,000.

    Explanation:

    Giving the following information:

    You want to endow a scholarship that will pay $5,000 per year forever.

    The school's endowment discount rate is 10 %

    We need to find the present value of a perpetual annuity. We will use the following formula:

    PV = Cf / i

    Cf = cash flow = 5,000

    PV = 5,000/0.10 = $50,000

    You must donate $50,000.
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “You want to endow a scholarship that will pay $ 5 000 per year forever, starting one year from now. If the school's endowment discount rate ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers