You plan to set up an endowment at your alma mater that will fund $205,000 of scholarships each year indefinitely. If the principal (the amount you donate) can be invested at 4.0 percent, compounded annually, how much do you need to donate to the university today, so that the first scholarships can be awarded beginning one year from now? (Round answer to 2 decimal places, e. g. 52.75.)

Solution and Explanation:

The present value of annuity = Annual cash flows/Discount rate

= 205000 divided by 4 percent

=$5125000.00

The future estimation of cash is determined by utilizing a rebate rate. The markdown rate alludes to a financing cost or an accepted pace of profit for different speculations. The littlest markdown rate utilized in these figurings is the hazard free pace of return. U.S. Treasury bonds are commonly viewed as the nearest thing to a hazard-free venture, so their arrival is regularly utilized for this reason.

in 2001, dell computer became the world’s largest personal computer vendor, continuing to

gain market share and post profits in an industry struggling with slumping sales and billions of

dollars in losses. dell sells 90% of its pcs directly to the final customer, largely bypassing the

reseller channel that accounts for most of the world’s pc sales. this direct customer relationship

is the key to dell’s business model, and provides distinct advantages over the indirect sales

model. dell’s direct relationship with the customer allows it to tailor its offerings to customer

needs, offer add-on products and services, and use the internet to offer a variety of customer

services. in addition, dell’s pcs are built to customers’ specifications upon receipt of an order,

giving dell additional advantages over indirect pc vendors who must try to forecast demand and

ship products based on those forecasts. dell’s direct sales and build-to-order model has achieved

superior performance in the pc industry in terms of inventory turnover, reduced overhead, cash

conversion, and return on investment (kraemer, et al., 2000).

explanation:

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