Capital Cost

1. A wealthy businessman wants to start a permanent fund for supporting research directed toward

sustainability. The donor plans to give equal amounts of money for each of the next 5 years, plus one now

(i.e., six donations) so that $100,000 per year can be withdrawn each year forever, beginning in year 6. If the

fund earns interest at a rate of 8% per year, how much money must be donated each time?

2. Compare the alternatives shown on the basis of their capitalized costs using an interest rate of 10% per year.