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Endowment will pay 500000 per year forever. First payment will not be received until 4 yrs from today. How much money needs to be set aside today if effective annual rate of return is 8 percent?
Answer is 4961451.51. How?
- olliverLv 61 month agoFavourite answer
PV of a perpetuity discounted back 3 years
Pv = 500000/8% x 1/(1+8%)^3 = 4961451.51
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