Robert became quite well-to-do as founder and president of Carlson Auto Paint and Supply, Inc. (CAPS). Now, he wants to start apermanent fund to support research directed toward improved sustainability of painted surfaces at his alma mater. He plans tocontribute money now so that $100,000 per year can be withdrawn each year forever, beginning in year 6. If the fund earns interest ata rate of 8% per year, how much money must be donated now?The amount of money that must be donated now is $

Based on an expected interest rate or rate of return, future value reflects how much money invested…

Answered: Robert became quite well-to-do as…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 8E

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Alex has set up a sinking fund for his son's college education in 10 years. From now on, he can save from his part-time job and deposit $3,000 at the beginning of each year in an account that pays 7.2% compounded annually. What is the balance of the account after 10 years of saving? After 10 years, his son reccived a full scholarship. Alex wishes to invest all his money in a project expected to generate annual cash flows of $10,000 for a period of 5 ycars. What is the NPV of the project if the discount rate is 8%?
Alex has set up a sinking fund for his son's college education in 10 years. From now on, he can save from his part-time job and deposit $3,000 at the beginning of each year in an account that pays 7.2% compounded annually. What is the balance of the account after 10 years of saving? After 10 years, his son reccived a full scholarship. Alex wishes to invest all his money in a project expected to generate annual cash flows of $10,000 for a period of 5 ycars. What is the NPV of the project if the discount rate is 8%?Should Alex invest in the project? Why?
Elaine is the CEO of Vandelay Industries and wants to create a sinking fund to make a purchase of new technology in three years. She anticipates this capital expense will be $20,000. If the sinking fund earns at an annual rate of 5% compunded quarterly, determine the quarterly installment that should be deposited into the fund.
Sarah Bishop, having become a very successful engineer, wishes to start an endowment at UTM that will provide scholarships of $10,000 per year to four engineering students beginning in Year 6 and continuing indefinitely. Determine the amount Sarah must donate now if the university earns 10% per year on endowment funds.
To benefit the ISU College of Business, Bill Vickers would like to establish a “perpetual” scholarship fund that will pay for MBA tuition and fees worth $210,000 per year. The fund’s first payment to ISU will be issued exactly 13 years from today. If the scholarship fund earns an annual return of 4.1 percent, how much must Mr. Vickers deposit today to establish it?
A wealthy graduate of a local university wants to establish a scholarship to cover the full cost of one student each year in perpetuity at her university. To adequately prepare for the administration of the scholarship, the university will begin awarding it starting in three years. The estimated full cost of one student this year is $32,000 and is expected to stay constant in real terms in the future. If the scholarship is invested to earn an annual real return of 10 percent, how much must the donor contribute today to fully fund the scholarship? Please do not give solution and formulae in image format.. thanku
A wealthy graduate of a local university wants to establish a scholarship to cover the full cost of one student each year in perpetuity at her university. To adequately prepare for the administration of the scholarship, the university will begin awarding it starting in three years. The estimated full cost of one student this year is $38,000 and is expected to stay constant in real terms in the future. If the scholarship is invested to earn an annual real return of 5 percent, how much must the donor contribute today to fully fund the scholarship?
. James decided to fund a school in Orange County in perpetuity. The first payment will be made three years from today (at the end of year three) and will be $5,320. Each year after that, the school will receive payment from James annually. The payment will increase at a rate of 3% per year after the first payment. If the annual interest rate is 9%, what is the present value of this endowment?
Francis wants to start a foundation that will pay its beneficiaries $64,000 per year forever, with the first cash flow occurring one year from today. If the funds will be invested to earn 7% per year, how much must Frank donate today? Enter your answer as a positive number rounded to the nearest penny.
Your grandfather wants to establish a scholarship in his father’s name at a local university and has stipulated that you will administer it. As you’ve committed to fund a $15,000 scholarship every year beginning one year from tomorrow, you’ll want to set aside the money for the scholarship immediately. At tomorrow’s meeting with your grandfather and the bank’s representative, you will need to deposit ___________ (rounded to the nearest whole dollar) so that you can fund the scholarship forever, assuming that the account will earn 4.50% per annum every year. Oops! The bank representative just reported that he misquoted the available interest rate on the scholarship’s account. Your account should earn 7.00%. The amount of your required deposit should be revised to____________. This suggests there is (an inverse / a direct) relationship between the interest rate earned on the account and the present value of the perpetuity.
Your grandfather wants to establish a scholarship in his father’s name at a local university and has stipulated that you will administer it. As you’ve committed to fund a $10,000 scholarship every year beginning one year from tomorrow, you’ll want to set aside the money for the scholarship immediately. At tomorrow’s meeting with your grandfather and the bank’s representative, you will need to deposit$200,000 (rounded to the nearest whole dollar) so that you can fund the scholarship forever, assuming that the account will earn 6.00% per annum every year.
Megan Berry, a freshman horticulture major at the University of Minnesota, has some financial questions for the next three years of school and beyond. Round your answers for the following questions to the nearest dollar. Megan is already looking ahead to graduation and a job, and she wants to buy a new car not long after her graduation. If after graduation she begins an investment program of $3,000 per year in an investment yielding 5 percent, what will be the value of the fund after three years? (Hint: Use Appendix A-3 or the Garman/Forgue companion website.) Round Future Value of Series of Equal Amounts in intermediate calculations to four decimal places. $ Megan's Aunt Karroll told her that she would give Megan $1,200 at the end of each year for the next three years to help with her college expenses. Assuming an annual interest rate of 5 percent, what is the present value of that stream of payments? (Hint: Use Appendix A-4 or the Garman/Forgue companion website.) Round Present…

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