A Generous Philanthropist Plans to Make a Onetime Endowment to a Renowned

question 58

Multiple Choice

A generous philanthropist plans to make a onetime endowment to a renowned heart researchcenter which would provide the facility with $250,000 per year into perpetuity. The rate of interestis expected to be 8 percent for all future time periods. How large must the endowment be?

• A) $2,314,814
• B) $3,125,000
• C) $2,000,000
• D) $3,000,000

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Definitions:

Investment Center

A business unit or division that is responsible for its own revenues, expenses, assets, and returns, and is evaluated on its profitability and efficiency in using its assets.

Profit Center

A department or unit within an organization that is responsible for generating revenue and is evaluated based on its profitability.

Service Department

A segment within a business that supports other departments by providing internal services or activities.

Fixed Costs

Expenses that do not vary in total despite fluctuations in the amount of work or volume of production.