How much in annual private donations

Assignment Help Financial Management

Reference no: EM131989605

The foundation for IUP manages an endowment currently valued at $85millio. THis money comes from private donations, student housing revenue and returns from a diversifies portfolio. The foundation wants to know how much it must receive in private donations annually for the endowment to reach $1 billion in 50 years given the following assumptions: -Assume today is January 1, 2018, and the endowment is at $85 million -The donations are received at the end of each year -The foundation disburses 4.5% of the total endowment at the end of each year for scholarships and other support for the accomplishment of university objectives. -The foundation collects $2.5 million at the end of each year from student housing revenue -The return on the endowment's diversified portfolio is 7% each year. a) How much in annual private donations must the Foundation receive for the endowment to reach $1 billion in 50 years given the above criteria? b) If we assume an average rate of inflation of 3% for the next 50 years, what is the present value of this future $1 billion endowment? c) Based on your answers to the questions above, do you see any issues with this analysis? What recommendations do you have for the Foundation?

Reference no: EM131989605

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