A Dallas philanthropist decided to donate $2.5 million to the University of Texas at Austin to fund scholarships in perpetuity for students in our Dallas MBA program. The school intends to make five scholarships every year starting one year from today. The scholarships are expected to grow at 3% per year, which corresponds to the expected growth rate of tuition. In addition, the funds will be invested by the University of Texas endowment and they expect to generate a return of 8% per year. 

How large are the initial scholarships that will be paid one year from today?

Answer rating: 100% (QA)

To determine the initial scholarships that will be paid one year from today we can use the present v... View the full answer