You Dream of Endowing a Chair in Finance at the Local

question 24

Multiple Choice

You dream of endowing a chair in finance at the local university that will provide a salary of $250,000 per year forever,with the first cash flow to be one year from today.If the university promises to invest the money at a rate of 4% per year,how much money must you give the university today to make your dream a reality?

• A)$3,000,000
• B)$6,250,000
• C)$8,857,143
• D)This question cannot be answered.

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Definitions:

Limited Life

Partnership is dissolved by admission, withdrawal, or death of a partner. Although the partnership is dissolved, the operations of the business can continue.

Bankrupt

The legal status of a person or entity that cannot repay the debts it owes to creditors, leading to legal intervention for asset distribution.

Accounts Payable

Liabilities of a business that are due to creditors within a short period, usually one year, and are to be paid in cash or other current assets.

Equipment

Tangible property used in the operations of a business not intended for sale, including machinery, computers, and furniture.