Evaluate the expected earning, Cost Accounting

During his career in the energy industry, T-Bone McAdams has accumulated $5,000,000 in "surplus savings" that he is planning to donate to his college alma mater, Oklahoma A&M, in return for priority seating at Oklahoma A&M "Cowgirl" basketball games. Mr. McAdams would like to spread his contributions over the quadrennial fundraising campaigns (occurring every 4 years) that he expects the University to conduct during the remaining 20 years that he expects to live. Mr. McAdams would like for each of his quadrennial donations to the University's fundraising campaigns to have the same purchasing power (and thus the same importance in determining his seating at basketball games). Mr. McAdams is confident that his investments will earn a quarterly compounded return of 10 percent over the next 20 years.

During this time, most economists believe that the level of prices (as measured by increases in the consumer price index) will increase at an annual rate of 4 percent per year. Assuming that the next Oklahoma A&M fundraising campaign will occur in four years, determine the initial contribution that will achieve Mr. McAdams charitable objectives.

Posted Date: 2/23/2013 12:45:26 AM | Location : United States

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