Perpetuity initial step confusion

In summary: Present ValueIn summary, the question is asking how much money needs to be invested today, in order to support a new library that will be opened in 8 years and will have estimated monthly expenses of $52,000, with all funds earning a 14.4% compounded monthly. The first step in solving this problem would be to calculate the present value (PV) of the future monthly expenses, taking into account the interest rate and time period.
  • #1
Aleckand9
3
0
Hi, I'm a bit confused regarding what steps to take to answer the following question:

In 8 years, a new library is being opened. Expenses are estimated to be $52,000, payable at the end of each month. If all funds earn 14.4% compounded monthly, how much money needs to be invested today, to be able to support the library in perpetuity?I have no idea what the first step is. I know it's something to do with 8 years but not sure what to do with it. I tried doing N=12*1000=12000, I/Y=14.4, P/Y=12, C/Y=12, FV=0, PMT=52000, PV=X however the answer I get for PV is wrong because I feel like I'm missing the initial step.

I could be completely wrong or misinterpreted the question so any help or clarification would be amazing. Thanks.
 
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  • #2
Aleckand9 said:
Hi, I'm a bit confused regarding what steps to take to answer the following question:

In 8 years, a new library is being opened. Expenses are estimated to be $52,000, payable at the end of each month. If all funds earn 14.4% compounded monthly, how much money needs to be invested today, to be able to support the library in perpetuity?I have no idea what the first step is. I know it's something to do with 8 years but not sure what to do with it. I tried doing N=12*1000=12000, I/Y=14.4, P/Y=12, C/Y=12, FV=0, PMT=52000, PV=X however the answer I get for PV is wrong because I feel like I'm missing the initial step.

I could be completely wrong or misinterpreted the question so any help or clarification would be amazing. Thanks.

Answered here: Confused on a question regarding Perpetuity
 

FAQ: Perpetuity initial step confusion

What is perpetuity initial step confusion?

Perpetuity initial step confusion is a term used in scientific research to describe the confusion or uncertainty that arises when beginning a study on a topic that has been studied extensively in the past. It refers to the difficulty in determining the starting point or initial step in a research project due to the large amount of existing information on the topic.

Why is perpetuity initial step confusion important to consider?

Understanding and addressing perpetuity initial step confusion is important because it can affect the validity and reliability of research findings. If the initial step is not properly identified, it can lead to biased or incomplete conclusions, which can impact the overall understanding of a topic.

What are some strategies for dealing with perpetuity initial step confusion?

One strategy for dealing with perpetuity initial step confusion is to conduct a thorough literature review to gain a comprehensive understanding of the previous research on the topic. This can help identify the current state of knowledge and potential gaps in the research. Collaboration with other experts in the field can also help clarify the initial step and guide the research process.

How can perpetuity initial step confusion be avoided?

To avoid perpetuity initial step confusion, it is important to clearly define the research question and objectives before beginning the study. This will help focus the research and prevent getting lost in the vast amount of existing information. Additionally, consulting with experienced researchers or seeking guidance from a mentor can also help avoid confusion and ensure a clear starting point for the research.

Is perpetuity initial step confusion a common issue in scientific research?

Yes, perpetuity initial step confusion is a common issue in scientific research, particularly in fields that have been extensively studied. It can be a challenge for researchers to navigate the vast amount of existing literature and determine the appropriate starting point for their study. However, by following proper research methods and seeking guidance from other experts, perpetuity initial step confusion can be effectively addressed and minimized.

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