Question
4. Before the 2008 recession, Tiger State University's (TSU) endowment was valued at $5.1 billion. Several years later, the endowment was valued at $3.8 billion.
4. Before the 2008 recession, Tiger State University's (TSU) endowment was valued at $5.1 billion. Several years later, the endowment was valued at $3.8 billion.
a. Assuming an expected rate of return of 5%, how much did the annual level of spending in perpetuity that Tiger State's endowment can support decrease?
b. Assume there are 20,000 students at TSU, paying an average of $15,300 per year in tuition. How much does tuition have to increase to offset the decrease in the endowment if spending is held constant?
c. The state also cut state funding to TSU by $23 million. How much does tuition have to offset this decrease if spending is held constant? How much will tuition have to increase to offset the losses from the endowment decline and from state funding?
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