Charitable university benefactor

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Reference no: EM137520

Q. A charitable university benefactor has decided to donate a large amount of money for student scholarships. The money can be provided in one lump-sum of $10mln, or in parts, where $5.5mln can be provided in year 1, as well as another $5.5mln can be provided in year 2. Assuming the opportunity interest rate is 6%, what is the present value of the second alternative? Which of the two alternatives should be chosen as well as why? How would your decision change if the opportunity interest rate was 12%? Elucidate all your calculations.

Reference no: EM137520

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