The Athletic Director is seeking a donation to cover future maintenance costs for an athletic complex. Maintenance costs are projected to be $1 million per year for the first 5 years, $1.3 million per year for years 6 through 10, and $1.5 million per year after that. To determine the size of the gift needed, the interest rate and compounding factors must be used to calculate how large an initial donation is required to fund the projected maintenance costs over the indefinite life of the building.
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Maintenance money for an athletic complex has been sought M.pdf
1. Maintenance money for an athletic complex has been sought. Mr. Kendall, the Athletic Director,
would like to solicit a donation to cover all future expected maintenance costs for the building.
These maintenance costs are expected to be $1 million each year for the first five years, $1.3
million each year for years 6 through 10 , and $1.5 million each year after that. (The building has
an indefinite service life.) If the money is placed in an account that will pay 5% interest
compounded annually, how large should the gift be? Click the icon to view the interest factors for
discrete compounding when i=5% per year. The gift should be $ million. (Round to two decimal
places.)
