Reference no: EM132619167

Problem 1: Suppose that a firm wishes to endow an advanced biological processes laboratory at a university. The endowment principal will earn interest that averages 8% per year, which will be sufficient to cover all expenditures incurred in the establishment and maintenance of the laboratory for an indefinitely long period of time (forever). Cash requirements of the laboratory are estimated to be $100,000 now (to establish it), $30,000 per year indefinitely, and $20,000 at the end of every fourth year (forever) for equipment replacement. Determine the present worth of all cash flows.