Reference no: EM131962471

You are in charge of a prestigious state university. You currently receive $250 million in state funding at the end of each year. You have current annual costs of $350 million, also paid at the end of each year, which grow at 4% per year. A new law has passed where the state is going to reduce their annual funding by 7% per year indefinitely. (So the funding will be 7% lower starting at the end of this year.) As part of the new law, you are allowed to set a new tuition rate for the end of this year, but once set, you can only increase it at the rate of inflation. Inflation is expected to be 2% per year. If you have 30,000 tuition-paying students, and do not forecast enrollment changing over time, what is the minimum per-student annual tuition to charge at the end of this year to remain solvent? Assume the annual interest rate is 6% and because this is a university, there is no end date for the forecast.