Finance 380: Financial Modelling

Question

Inputs

Check Figures

EARLY

Loan = $300,000, 30 years (360 months), i=4.25%

Payoff in 160 to 170 months

RETIRE

Current age = 21, 1st retirement check at 67, last retirement check at 80. Starting salary=$60,000, salary growth = 3%, save 5% of salary. Bond fund return = 4%, Stock fund return = 10%. Leave $1,000,000 to heirs.

Annuity: $160,000 to $170,000 per year.

ABALONE

Mean length: M: 105-110

F: 110-115

I: 75-85

CATCH

Last year (year 7) long-term debt $8,000 to $8,500

There’s an easy way and a hard way to do this question. The easy way is to set, MS, NP, and LTD =0 AND LOOK AT THE FINANCING GAP. Then, decide how to proceed.

RAISE

Raise percentage between, 4% and 5%

NPV

NPV cross-over rate between 4% and 6%

DONE

Deposit $100/month for 300 months, i=4%. Withdraw $200/month for240 months

Balance $38,000 to $42,000

Max number of withdrawals: 575 to 600 months. Note: this question is trickier than I thought; if the future value of your deposits times the monthly interest rate is greater than your monthly withdrawal, you can withdraw funds forever. And, if the withdrawal is too large, you’ll end up with negative balances.

SIM

Terminal Value mass between $37,500 and $52,500