Endowment Project.

Consider a 10 year project with 10% annual returns. The project requires an endowment E, to be paid at four equal installments: initially, year 2, year 4, and year 5. Project re-investment of $1.75m is expected at the seventh year. At the end life of the project (n=10), all project assets are expected to be salvaged at one-fifth the value of the endowment (Salvage = 1/5 E). The project will generate net benefits of $600K/year during the first five years, and $800K/year for the following five years.

Determine the following: a. Sub-contracting value of the project.

b. Retained asset value (%).

c. Current valuation coefficient of the endowment (%).

d. Project re-investment in todays terms.

e. The value of the endowment E.