Question

Robert became quite well-to-do as founder and president of Carlson Auto Paint and Supply, Inc. (CAPS). Now, he wants to start a permanent fund to support research directed toward improved sustainability of painted surfaces at his alma mater. He plans to contribute money now so that $200,000 per year can be withdrawn each year forever, beginning in year 7. If the fund earns interest at a rate of 8% per year, how much money must be donated now

Answer 1

Answer:

The answer is "1475,000".

Explanation:

Given:

$n=6\ year \ \ \ \text{because it start with 7 beginning year} \\\\r=8\% = 0.08\\\\P= \ 200,000$

calculating the 6-year future value:

$= \frac{\ 200,000}{0.08} \\\\= \ 2,500,000$

Using formula:

$\bold{PV=FV(1+r)^{-n}}$

      $=\ 2,500,000(1+0.08)^{-7} \\\\ =\ 2,500,000(0.59)\\\\=\ 1475,000$