It is 2021 and you have decided to give back to your university by endowing the operating budget for a new dining hall being built on campus. Your donation will go into the university's endowment pool, which is expected to earn annual returns of 9%. The first cash flow to cover operational expenses will be distributed from the endowment upon the completion of the dining hall in 2023, 2 years from today. The student government has asked, and you have agreed, to allow each annual cash flow generated from your gift to grow at a rate of 2% from the prior year's payment. If you are planning to donate $3,600,000 today and you want the cash flows it generates to fund the new dining hall in perpetuity, what is the amount of the first payment that the endowment will be able to distribute to the dining hall upon its opening in 2023? (Choose the most appropriate answer) O A. $274,680.00

It is 2021 and you have decided to give back to your university by endowing the operating budget for a new dining hall being built on campus. Your donation will go into the university's endowment pool, which is expected to earn annual returns of 9%. The first cash flow to cover operational expenses will be distributed from the endowment upon the completion of the dining hall in 2023, 2 years from today. The student government has asked, and you have agreed, to allow each annual cash flow generated from your gift to grow at a rate of 2% from the prior year's payment. If you are planning to donate $3,600,000 today and you want the cash flows it generates to fund the new dining hall in perpetuity, what is the amount of the first payment that the endowment will be able to distribute to the dining hall upon its opening in 2023? (Choose the most appropriate answer) O A. $274,680.00

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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On January 1, 2021, Grace Corp. created a special building fund by depositing a single sum of P300,000 with a Trust Company. The purpose of the fund is to provide resources to build another wing of a building that is expected to be completed by the end of 2025. The company estimates a total expenditure of P1.5 million and completion by January 1, 2026. Grace Corp. plans to make annual deposit from December 31, 2021 to 2025 to accumulate the required P1.5 million. The Trust Company will increase the fund each December 31 at an interest rate of 8%. Both the accounting period of the company and the fund end on December 31. Based on the above and the result of your audit, answer the following (Round off present and future value factors to four decimal places and final answer to the nearest peso): 1. How much is the annual deposit to the fund? 2. How much is the fund balance as of December 31, 2021?
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The State of Texas has a pension fund liability of $25 million, due in 10 years. Each year the legislature is supposed to set aside an annuity to arrive at this future value. This annuity is based on what the legislature believes it can earn on this money. Estimate the annuity needed each year for the next 10 years, assuming that the interest rate that can be earned on the money is 6%. $1,896,699 $3,657,129 $6,687,085 $4,675,987
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