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)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 12P

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