Suppose the CEO of your firm wishes to endow a scholarship that will pay $25,000 at...

Question

Question

business finance

Answer 1

Answer #1


a)When the discount rate is 4% , he must donate following amount
=	amount/discounting factor
=	25000/.04
	625000

b)if first payment is made immediately then, he must donate following amount

Year	amount	present value factor ( 4%)
0	25000	1
2 to infinity	25000	0.04

	Total amount to be donated		25000+(25000/.04)present value factor for 2nd year
			25000+(25000/.04)*.924
			602500

Answer 2

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