BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
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Question
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You dream of endowing a chair in finance at the local university that will provide a salary of $150, 000 per year forever, with the first cash flow to be one year from today. If the university promises to invest the money at a rate of 5% per year, how much money must you give the university today to make your dream a reality?
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$3, 000, 000
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$15, 000, 000
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$2, 857, 143
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This question cannot be answered.
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Explanation:
Detailed explanation-1: -(1) As it’s a perpetuity P = A/r = 150, 000/5.5% = 2, 727, 272.73 Yo…
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