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You want to endow a scholarship that will pay $ 8000 per year​ forever, starting one...

You want to endow a scholarship that will pay $ 8000 per year​ forever, starting one year from now. If the​ school's endowment discount rate is 4 %​, what amount must you donate to endow the​ scholarship?

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Answer #1

Present value of perpetuity=Annual cash flows/discount rate

=$8000/0.04

which is equal to

=$200,000.

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