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Iteru [2.4K]
3 years ago
9

After a retiring from a successful business​ career, you would like to make a donation to your university. This donation will go

into the​ school’s endowment pool and the returns generated from the donation will support the salary of a new professor in the business school on a perpetual basis. The university expects to earn returns of​ 5.5% on its endowment pool. You may assume that any distributions to support the salary will be made annually.
Part A) You can make a donation today (t=0) in the amount of $2,500,000. The first cash flow distribution from your donation to cover the professor's salary will take place in one year (at t=1). Which of the following is closest to the annual salary payment that can be made as a result of your donation?

A. $2,500,000
B. $454,545
C. $100,000
D. $137,500

Part B) After further discussions, the university determines that the employment agreement with the new professor will call for annual salary increases of 2%. Given this new requirement, and assuming the first salary distribution will still occur one year from today, what is the starting salary (at t=1) that can be supported with your $2,500,000 donation?

A. $50,000
B. $187,500
C. $140,250
D. $87,500
Business
1 answer:
ICE Princess25 [194]3 years ago
3 0

Answer:

Part A) D. $137,500

Part B) C. $140,250

Explanation:

Part A) The computation of annual salary payment is shown below:-

Annual salary = Donation made × Interest rate

= $2,500,000 × 5.5%

= $137,500

So, for computing the annual salary we simply multiply the donation made with interest rate.

Part B) The computation of starting salary is shown below:-

Starting salary = Annual salary + Increased annual salary

= $137,500 + 2%

= $140,250

Therefore for computing the starting salary we simply added the annual salary with increased annual salary.

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Question 2
mojhsa [17]

Answer:

The answer is below

Explanation:

Probability distribution are statistical function that shows all the possible outcomes of a random variable within a given range of values.

a) The mean (\bar x) of a probability distribution of a discrete random variable is:

\bar x=\Sigma\ [xP(x)] = (0 * 0.8) + (1 * 0.15) + (2 * 0.04) + (3 * 0.01) = 0.26

b) The standard deviation (σ) of a probability distribution of a discrete random variable is:

\sigma=\sqrt{ \Sigma\ [(x-\bar x)^2*P(x)]}\\\\\sigma=\sqrt{(0-0.26)^2*0.8+(1-0.26)^2*0.15+(2-0.26)^2*0.04+(3-0.26)^2*0.01} \\\\\sigma=0.577

7 0
2 years ago
If the cost of an item of inventory is $60, the current replacement cost is $65, and the selling price is $95, the amount includ
KATRIN_1 [288]

Answer:

The amount included in the inventory is $60

Explanation:

Lower of cost and net realizable value determine the value of closing inventory based on the cost incurred to produce or purchase a inventory unit or Market value of the inventory unit which ever is lower. In this question cost of unit of inventory is $60 and the replacement cost which market value of the item of inventory. The unit cost of an item of inventory is lower as compared to the replacement value.

5 0
2 years ago
At age 50, Charles began receiving payments under a distribution method that provides for substantially equal payments over his
shusha [124]

Answer:

correct answer is 4) $169,000.00

Explanation:

given data

received distributions totaling =  $14,000

remaining benefits lump-sum = $155,000

solution

we know that substantial payment by as distribution method not subjected to the early distribution penalty

but lum sum amount distribution before age 59.5 is subject to 10% penalty

so here we can say till 59.5 year annuity payment not changed

so amount subject to the penalty is = $14000 + $155000

amount subject to the penalty is = $169000

so correct answer is 4) $169,000.00

4 0
3 years ago
QUICK ONE!
never [62]

Answer:

Rate is 1.5 times the straight line depreciation rate which is;

= \frac{80,000}{8}

= $10,000 per year

Rate = \frac{10,000}{80,000} * 100%

=12.5%

Reducing balance rate = 12.5% * 1.5

= 18.75%

The Depreciation Schedule would be;

Year   Beginning Book Value  Depreciation Expense   Accumulated Depreciation   Book Value

1  $80,000  80,000*18.75% = $15,000   $15,000   $65,000

2  $65,000  65,000 * 18.75% = $12,1875.50   $27,187.50   $52,812.50

3  $52,812.50  52,812.5 *18.75% = $9,902.34   $37,187.84   $42,910.16

4  $42,910.16  42,910.16 * 18.75% = $8,045.66   $45,233.50   $34,766.50

5  $34,766.50  34,766.50 * 0.1875 = 6,518.72   $51,752.22   $28,247.78

6  $28,247.78  28,247.78 * 0.1875= $5,296.45   $57,048.67   $22,951.33

7  $22,951.33  22,951.33 * 0.1875= 4,403.37   $61,452.04   $18,547.96

8  $18,547.96  18,547.96 * 0.1875 = $3,477.74    $80,000   $0

   $3,477.74 + 15,070.22= $18,574.96      

Depreciation for the last year was not sufficient to take the truck to $0 so the remainder will be depreciated in that year so that it may be completely depreciated.

3 0
3 years ago
Leslie's Unique Clothing Stores offers a common stock that pays an annual dividend of $2.40 a share. The company has promised to
Blizzard [7]

Answer:

The maximum amount that should be paid for one share of this stock today is $15.29

Explanation:

The price of a stock which pays a constant dividend forever can be calculated using the zero dividend growth model of the Dividend Discount Model (DDM) approach. The DDM values a stock based on the present value of the expected future dividends from the stock discounted using the required rate of return on stock.

The formula for price under zero growth model of DDM is,

Price today (P0) = Dividend / required rate of return

P0 = 2.4 / 0.1570

P0 = $15.286 rounded off to $15.29

5 0
3 years ago
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