The admissions director of an engineering college has $500,000 in scholarships each year from an endowment to offer to high-achieving applicants. The value of each scholarship offered is $25,000 (thus, 20 scholarships are offered). The benefactor who provided the money would like to see all of it used each year for new students. However, not all students accept the money; some take offers from competing schools. If they wait until the end of the admissions deadline to decline the scholarship, it cannot be offered to someone else, as any other good students would already have committed to other programs. Consequently, the admissions director offers more money than available in anticipation that a percentage of offers will be declined. If more than 10 students accept the offers, the college is committed to honoring them, and the additional amount has to come out of the dean’s budget. Based on prior history, the percentage of applicants that accept the offer is about 70%. Develop a spreadsheet model for this situation, and apply whatever analysis tools you deem appropriate to help the admissions director make a decision on how many scholarships to offer. Explain your results in a business memo to the director, Mr. P. Woolston.
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