Question
Fortis Incorporated intends to endow a research Laboratory at MUNL's Engineering Faculty. The issue is how much money Fortis will have to provide up front
Fortis Incorporated intends to endow a research Laboratory at MUNL's Engineering Faculty. The issue is how much money Fortis will have to provide up front (Initial Principle) to finance the laboratory, maintenance and research for an indefinite period of time (forever); the endowment is expected to earn interest at 8%. The initial cash requirement of the lab will be $120000; the endowment will also provide $34000 per year, indefinitely, to cover the research costs and $18000 at the end of every fourth year (forever) to cover the cost of maintenance (i.e. equipment replacement).
How much money is required now to cover the initial cost of the lab and then to earn enough interest to support the remaining costs of research and maintenance forever?
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