You dream of endowing a chair in finance at the local university that will provide a salary of $150,000 per year forever, with the first cash flow to be one year from today

If the university promises to invest the money at a rate of 5% per year, how much money must you give the university today to make your dream a reality?
A) $3,000,000
B) $15,000,000
C) $2,857,143
D) This question cannot be answered.

Answer: A
Explanation: A) PV = PMT/r = $150,000/.05 = $3,000,000.