In: Finance
An Endowment Fund has a $5.0 million one time commitment in 2018. It expects $7.0 million in annual contributions in 2018 and $3.0 million in endowment expenses. The current income tax rate is 30%. What is the endowment’s liquidity requirement?
a) $3.0 million
b) $5.6 million
c) $1.0 million
d) $2.2 million
e) $6.0 million
. | ($ Million) |
Annual Contribution received in 2018 | 7 |
Less:Endowment Expenses | 3 |
Endowment inocme before tax in 2018 | 4 |
Less:Income Tax@30% | 1.2 |
Income available in 2018 | 2.8 |
one time commitment in 2018 | 5 |
liquidity requirement in 2018 | 2.2 |
[Commitment-Income available] |
Correct Option-(d) $2.2 million