Reference no: EM132285620

Personal Financial Planning

Project Description:

The goal of this project is to help you plan for your financial future. The first step in creating a plan is to derive your cash flow. In this project, your planning horizon is 3 years. The starting point of your cash flow is the first month after you graduate. The provided Excel program lists all the data categories that you need to know to create your cash flow. You should use the Excel program to create two scenarios:

Scenario 1: You start your life after graduation with a full time job that pays $54,000 a year after deducting federal income taxes, state income taxes, Medicare fees (tax), and Social Security fees (tax). Your salary increases by 3% every year.

Scenario 2: You start your life after graduation with a part time job that pays $15,000 a year (after all taxes and fees listed above) for the first year, and for the second year you find a full time job that pays $54,000 (after all taxes and fees listed above) a year with 3% salary increase per year.

In both scenarios you are free to determine the value of every other revenue (income) or cost  (expenses) item. All the entered values must be close to reality and actual values (what happens in real life).

You must enter values for all basic items such as food, medical, etc. Leaving these items as zero will generate a zero grade for your project.

You must also take into account that the prices of basic goods increase every year due to inflation. So the costs that you enter for these items must show an increment of at least 2% per year.

Perform the following steps for each scenario:

1- Calculate the PW and AW of your 3-year cash flow using interest rate scenarios of 1%, 2%,  3%, 4% and 5%.

2- Calculate the ROR of your cash flow given a reinvestment rate of 6%.

3- How much in savings you should have at the time of graduation in order to make sure that your cumulative cash flow during the three-year planning horizon will not become negative.

4- Select a target savings amount (must be more than $5,000) to be achieved in 3 years after your graduation. Assuming a reinvestment rate of 6% (for positive flows) and a borrowing  rate of 4% (for negative flows), try to remove or reduce your low priority cost items until
you can achieve your target.

For all items above, you must show the complete calculations and the answers to the questions. Everything must be typed. We need two files from you: 1) your Excel file 2) A Word file that describes the answers to the questions above. The names of these files must be your UIN.