Question: THIS QUESTION HAS TWO PARTS Atfor a retiring from a successtul business careor, you would like to make a donation to your univershy. This donation

THIS QUESTION HAS TWO PARTS Atfor a retiring from a successtul business careor, you would like to make a donation to your univershy. This donation will go into the schoor's endowment pool and the returns generatied trom Ehe donation will aupport the salary of a new professor in the business school on a perpetual basis. The universily axpects to earn returns of 5.5% on its endowment pool. You may assume that any ditibutions to support the salary wil be made annually. Part A) You can make a donation today (t=0) in the amount of 52,000,000. The frst eash flow distrbution from your donation to cover the professor's salary will take place in one year (at tw 1). Whic of the folowing is closest to the annual salary pleyment that can be made as a result of your donation? A. $363,630 B. $110,000 C. 560,000 D. $2,000,000 Part B) After further discussions, the universily detarmines that the employment agreement with the new professor will eall for annual salary incraases of 2 is, Given this new roquiremeet, and Paswuring the frat salary ditrabulion will atill occur one year from today, what is the starting salary (at t=1 ) that can be supported with your $2,000,000 donation? A. 570,000 B. 5150,000 c. $112,200 D. $40,000

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