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 the following scenario. 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. 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:
1‐ Calculate the PW and AW of your 3‐year cash flow using interest rate scenarios of 2%.
2‐ Calculate the ROR of your cash flow given a reinvestment rate of 5%.
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.
Sample Solution
