A firm wishes to endow an advanced biological processes laboratory at a university. The endowment principal will earn interest that averages 8% per year, which will be sufficient to cover all expenditures incurred in the establishment and maintenance of the laboratory for an indefinitely long period of time (forever). Cash requirements of the laboratory are estimated to be $100,000 now (to establish it) and $20,000 at the end of every fourth year (forever) for equipment replacement. Determine, what amount of endowment principal is required to establish the laboratory and then earn enough interest to support the remaining cash requirements of this laboratory forever? (Refer Table C-11 on page 3 of 3)

A firm wishes to endow an advanced biological processes laboratory at a university. The endowment principal will earn interest that averages 8% per year, which will be sufficient to cover all expenditures incurred in the establishment and maintenance of the laboratory for an indefinitely long period of time (forever). Cash requirements of the laboratory are estimated to be $100,000 now (to establish it) and $20,000 at the end of every fourth year (forever) for equipment replacement. Determine, what amount of endowment principal is required to establish the laboratory and then earn enough interest to support the remaining cash requirements of this laboratory forever? (Refer Table C-11 on page 3 of 3)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Solve by using the sinking fund or amortization formula. A manufacturing company has determined that it will need $600,000 in 6 years for a new roof on its southeastern regional warehouse. A sinking fund is established for the roof at 3.2% compounded semiannually. What equal payments (in $) are required every 6 months to accumulate the needed funds for the roof? (Round your answer to the nearest cent.)

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