Assignment 11 - Tri-State Corporation The Human Resource...

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Unformatted text preview: Tri-State Corporation The Human Resource Department at Tri-State Corporation has been asked to develop a financial planning model for all employees. The model will help answer the following questions: What will your portfolio be worth in 10, 20 years, etc.? How much will your portfolio be worth when you stop working? Kate Riegle has helped determine that the annual salary growth rate will vary from 0-10% and a uniform probability distribution would provide the most realistic approximation. The accounting firm has suggested the annual portfolio growth rate would be a normal probability distribution approximation with a mean of 10% and a standard deviation of 5%. The original file was created with a constant annual salary growth rate and a constant annual portfolio growth rate. Tom Gifford used his salary of $34,000 with an annual salary growth rate of 5%, an annual investment rate of 4%, and an annual portfolio growth rate of 10% approximating an ending portfolio of $627,937 after 30 years. Tom Gifford would like to reach a goal of $1 million after 30 years, but in order to achieve that goal at the current annual salary and portfolio growth rate, he would need to increase his annual investment rate to 7.96952%. Financial Analysis – Portfolio Projections Age 25 Current Salary $34,000 Financial Analysis – Portfolio Projections Current Portfolio $14,500 Age 25 Annual 5% Current Salary Salary Growth Rate $34,000 Annual 7.96952% Current Investment Portfolio Rate $14,500 Annual Portfolio Growth Rate 10% Salary Growth Rate 5% Annual Investment Rate 4% Year Age Beginning Salary New Annual Portfolio Growth Rate 10% Portfolio Investment 1 25 14,500 34,000 2,710 Beginning Salary New Year Age 2 26 18,795 35,700 2,845 Portfolio Investment 3 27 23,662 37,485 2,987 1 25 14,500 34,000 1,360 4 28 29,162 39,359 3,137 2 26 17,378 35,700 1,428 5 29 35,375 41,327 3,294 3 27 20,615 37,485 1,499 6 30 42,371 43,394 3,458 4 28 24,251 39,359 1,574 7 31 50,239 45,563 3,631 5 29 28,329 41,327 1,653 8 32 59,076 47,841 3,813 6 30 32,898 43,394 1,736 9 33 68,987 50,233 4,003 7 31 38,010 45,563 1,823 10 34 80,089 52,745 4,204 8 32 43,725 47,841 1,914 11 35 92,511 55,382 4,414 9 33 50,107 50,233 2,009 12 36 106,397 58,152 4,634 10 34 57,227 52,745 2,110 13 37 121,903 61,059 4,866 11 35 65,165 55,382 2,215 14 38 139,202 64,112 5,109 12 36 74,008 58,152 2,326 15 39 158,488 67,318 5,365 13 37 83,851 61,059 2,442 16 40 179,969 70,684 5,633 14 38 94,801 64,112 2,564 17 41 203,881 74,218 5,915 15 39 106,973 67,318 2,693 18 42 230,480 77,929 6,211 16 40 120,498 70,684 2,827 19 43 260,049 81,825 6,521 17 41 135,517 74,218 2,969 20 44 292,901 85,916 6,847 18 42 152,185 77,929 3,117 21 45 329,381 90,212 7,189 19 43 170,677 81,825 3,273 22 46 369,868 94,723 7,549 20 44 191,181 85,916 3,437 23 47 414,781 99,459 7,926 21 45 213,908 90,212 3,608 24 48 464,581 104,432 8,323 22 46 239,088 94,723 3,789 25 49 519,778 109,653 8,739 23 47 266,975 99,459 3,978 26 50 580,932 115,136 9,176 24 48 297,850 104,432 4,177 27 51 648,660 120,893 9,635 25 49 332,021 109,653 4,386 28 52 723,642 126,938 10,116 26 50 369,828 115,136 4,605 29 53 806,629 133,284 10,622 27 51 411,647 120,893 4,836 30 54 898,445 139,949 11,153 28 52 457,889 126,938 5,078 29 53 509,009 133,284 5,331 30 54 565,508 139,949 5,598 Portfolio Earnings 1,585 Portfolio 2,022 Earnings 2,516 1,585 3,073 1,809 3,702 2,136 4,410 2,504 5,205 2,916 6,098 3,377 7,099 3,892 8,219 4,468 9,472 5,111 10,871 5,828 12,434 6,627 14,176 7,517 16,117 8,507 18,279 9,608 20,684 10,832 23,359 12,191 26,331 13,700 29,632 15,374 33,298 17,231 37,364 19,290 41,874 21,571 46,874 24,098 52,415 26,896 58,552 29,994 65,348 33,421 72,870 37,213 81,194 41,406 90,402 46,043 51,167 56,831 Ending Portfolio 18,795 Ending 23,662 Portfolio 29,165 17,378 35,375 20,615 42,371 24,251 50,239 28,329 59,076 32,898 68,987 38,010 80,089 43,725 92,511 50,107 106,397 57,227 121,903 65,165 139,202 74,008 158,488 83,851 179,969 94,801 203,881 106,973 230,480 120,498 260,049 135,517 292,901 152,185 329,381 170,677 369,868 191,181 414,781 213,908 464,581 239,088 519,778 266,975 580,932 297,850 648,660 332,021 723,642 369,828 806,629 411,647 898,445 457,889 1,000,000 509,009 565,508 627,937 Citation Anderson, Sweeney, Williams, Camm, and Martin. Quantitative Methods in Business GBS220. 13th ed. Mason: Cengage Learning, 2010. Print. ...
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