Question
You are president of a state college. You receive $250 million in state funding at the end of each year. You have costs of $350
You are president of a state college. You receive $250 million in state funding at the end of each year. You have costs of $350 million, also paid out at the end of each year, growing at 4% per year. The state is going to reduce funding by 7% per year indefinitely. To compensate for this, you are allowed to set a new tuition rate for the end of this year, but once set, you can only increase it at the rate of inflation. Inflation is expected to be 2% per year. If you have 30,000 tuition paying students, and that number is constant in the forecast, what is the minimum per student annual tuition to charge at the end of this year to remain solvent? Annual interest rate is 6% and there is no end date since it is a college.
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