I’m real out of my depth here and hoping to get some insight: I just got a project for a nonprofit to calculate what funding is required to begin an endowment with a goal of getting up to $100 million in 20 years with 5% annual growth.
I think this is some sort of time-value-of-money problem but I otherwise have no idea how to approach it because I am not a nonprofit person; I’ve only worked for businesses. From my very limited research on endowments, I particularly don’t know how to approach:
1) Isn’t there a requirement for a 5% minimum payout each year? So now I’m not sure if that means it’s eating up all of the goal growth or if this is a diff number to account for
2) Do I need to know the allocation of restricted, temporary, & unrestricted funds ahead of time (true, term, quasi)? I’m not sure how I could know that when we haven’t raised all that goal money
3) Please ELI5 what “pool unit market value” means—seems like there’s some initial calculation of finding a per share price…? But I have no idea how this works
4) I think just a basic understanding of the statement of cash flows for using (5% payout requirement) and annual growth goal and some sort of interest/growth schedule/organizational tool to see how it fits together?
I’m still struggling to wrap my head around what sort of statement I’m preparing—interest payment schedule, cash flow statement, something else? Any insight on formulas/calculations and general organization would be incredibly appreciated!!!
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