An alumni of CSUN's engineering department would like to donate to the department's scholarship fund. Three options are available: Plan A. $60,000 now. Plan B. $15,000 per year for 8 years beginning 1 year from now. Plan C. $50,000 three years from now and another $80,000, five years from now. The department want to select the plan that maximizes the buying power of the dollars received, and to account for inflation in the calculations. If the donation earns a real 10% per year and the inflation rate is expected to average 3% per year, which plan should be accepted?

An alumni of CSUN's engineering department would like to donate to the department's scholarship fund. Three options are available: Plan A. $60,000 now. Plan B. $15,000 per year for 8 years beginning 1 year from now. Plan C. $50,000 three years from now and another $80,000, five years from now. The department want to select the plan that maximizes the buying power of the dollars received, and to account for inflation in the calculations. If the donation earns a real 10% per year and the inflation rate is expected to average 3% per year, which plan should be accepted?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 6E

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