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Assume a discount rate of 9% and annual compounding. How much must you set aside today to fund the gift?

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter27: Time Value Of Money (compound)

Section: Chapter Questions

Problem 6E

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Concept explainers

Income Statement

Income Statement also commonly called a profit and loss statement, one of the key financial statements (considered together with balance sheet and cash flow statement) which shows the revenues and expenses, as well as the gains and losses of a company for a given period. In other words, it presents the financial performance/profitability of a business over a specified accounting period.

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You will endow a DePaul scholarship with a grant gift stream that lasts forever. The first grant is to be made 10 years from now in the amount of $1,303.14, but it must grow by 3% per year forever. Assume a discount rate of 9% and annual compounding. How much must you set aside today to fund the gift?

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