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Math Help - Need Help- Can you do this?

  1. #1
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    Need Help- Can you do this?

    Hi All,

    I am in need of an urgnet help, please help me.

    I am working with an NGO and I have given the assignment to let management know an amount which is sufficient to cover the expenses for infinite period.

    Conditions:
    Current annual expenses 100,000
    Rate of Return 10% p.a.
    Rate of inflation 10%.
    What will be the amount?

    Please help
    regards
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  2. #2
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    Quote Originally Posted by asifrupani View Post
    Hi All,

    I am in need of an urgnet help, please help me.

    I am working with an NGO and I have given the assignment to let management know an amount which is sufficient to cover the expenses for infinite period.

    Conditions:
    Current annual expenses 100,000
    Rate of Return 10% p.a.
    Rate of inflation 10%.
    What will be the amount?

    Please help
    regards
    What's an "NGO"?

    Normally, with a Rate of Return equal to a Rate of Inflation, you will have quite a problem finding a finite solution.

    If i = annual rate of return = 0.10.
    If r = annual rate of inflation = 0.10

    Present value of present year = 100000*(1+r)^{0}/(1+i)^{0} = 100000

    Present value of NEXT year = 100000*(1+r)^{1}/(1+i)^{1} = 100000

    Do you see the problem, yet?
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  3. #3
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    Quote Originally Posted by TKHunny View Post
    What's an "NGO"?
    Neanderthalian Growling Orangutan
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  4. #4
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    Thanks for reply

    NGO=Non Governmental Organization=NPO

    What if inflation rate = 10%
    Rate of return = 8%

    thanks and waiting for reply
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  5. #5
    Grand Panjandrum
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    Quote Originally Posted by asifrupani View Post
    Thanks for reply

    NGO=Non Governmental Organization=NPO

    What if inflation rate = 10%
    Rate of return = 8%

    thanks and waiting for reply
    I think you need a rate of return in excess of the rate of inflation (see TKH's post)

    CB
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  6. #6
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    Ok,

    Now assume inflation rate is 8% and ROR is 10R% and current year's expenses are 100,000, what would be the amount to cover expenses for infinite period?

    thanks
    regards
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  7. #7
    Member jonah's Avatar
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    Quote Originally Posted by asifrupani View Post
    Ok,

    Now assume inflation rate is 8% and ROR is 10R% and current year's expenses are 100,000, what would be the amount to cover expenses for infinite period?
    Then you'd have

    <br />
\frac{{100,000 \times 1.10}}{{0.10 - 0.08}}<br />
    Last edited by jonah; September 20th 2009 at 01:45 PM.
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