Time Value of Money Research Case Study
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Time Value of Money Research Case Study
Good Efforts! You meet competence performance requirements but not yet proficiency or mastery in this topic!
You are not correctly explained the concept of the time value of money, including the present and future value of $1, and present and future value of an annuity. Explain the difference between the annuity payment at the beginning and the end of the period. Second, you are not correctly demonstrated the future value of the monthly cash investments for the next 10 years given the investment earns the projected 8% annual return. Third, you are not correctly calculated the total monthly payment that can be withdrawn from the investment over 20 years given the anticipated 8% annual rate of return continues to be met through the 20 years of retirement. Provide management the monthly payment amount that will be available to payout in monthly pension amounts. Fourth, you are not correctly assumed all five members of management will receive the same monthly annuity payment, provide management the proposed monthly retirement payment that can be offered to these five members of management. Fifth, you are not correctly used the built-in cash flow functions in Excel to perform all calculations, explaining in the adjacent cells the values you entered the function.
My detailed summary comments are:
1) Explanation of Time Value Money contains some significant inaccuracies or omissions. Inaccurate annuity payment calculation Score 2
You didn’t provide the calculation all steps for discounted cash flow techniques. Your presentation doesn’t include the retirement plan investment for the provided example with all required components in this competency.
2) Presentation projects rate of return with significant inaccuracies. Score 2
You didn’t provide the calculation all steps for discounted cash flow techniques. Your presentation doesn’t include the retirement plan investment for the provided example with all required components in this competency.
3) Presentation projects rate of payout for employees with significant inaccuracies. Score 2
You didn’t provide the calculation all steps for discounted cash flow techniques. Your presentation doesn’t include the retirement plan investment for the provided example with all required components in this competency.
4) Presentation projects rate of payout for management with significant inaccuracies Score 2
1.
Your reasoning is sound, well done but I found some weakness in your explanation and I have attached my support how you can improve all inaccuracies
5) Some inaccuracies in the excel calculations and or incomplete or inaccurate explanations of values Score 2
1.
You didn’t provide all correct calculations with the appropriate explanations
Here, more support to improve these deliverables:
The 4 Essential Elements of a Retirement Plan
Set Clearly Defined Goals
With an increasing life expectancy, it’s no longer enough to simply state, “I want to retire at age 65” as a goal. In order to inspire a well-conceived plan and the will to faithfully execute it, you need a clear vision of your life in retirement.
- Do you plan on actually retiring; or would you like to work in some other field?
- How will you live in retirement?
- Where will you live?
- What would you like to accomplish?
As you get closer to your retirement goal, your vision will become clearer and more focused. Along the way, your retirement goal becomes your investment benchmark, guiding your investment decisions based on where you are in relation to your goal.
Calculate Your Retirement Costs
One of the more popular rules suggests that retirees will need just 70% to 80% of their pre-retirement income to maintain their standard of living. The major flaw with this rule is it doesn’t account for the true cost of aging. In calculating the cost of retirement, the equation has become more difficult due to the new reality of expanding life spans which can also mean higher health care costs. The cost of your retirement needs to factor realistic spending assumptions based on your goals and desired lifestyle with contingencies for health care costs and unexpected expenses.
Once you know the cost or your retirement you can calculate how much you will need at retirement which becomes your accumulation goal.
Long-Term Investment Strategy
Accumulating enough capital to provide lifetime income sufficiency is a daunting task, made more difficult in an environment of low returns on savings and increased stock market volatility. It requires a serious long-term investment strategy with the confidence and discipline to follow it. It starts with a specific [investment objective], which can be stated as the return on investment that must be achieved to meet your capital need.
The next step is to develop a risk profile that will enable you to match your tolerance for risk with a portfolio of investments that can reasonably expect to achieve your objective. This is done by developing an asset allocation plan that mixes different types of investments with varying correlation to one another. Then, through broad diversification within the asset classes, you can manage portfolio volatility and pursue more stable long-term returns.
Tax-Diversification
For decades we have been told that the best way to accumulate capital for retirement is through tax deferred savings vehicles, such as a 401(k) plan or an IRA. Although it still makes sense for accumulating capital, it doesn’t take into account the tax consequences of income withdrawals and its impact on the total spendable income available in retirement. Retirement planning used to be almost entirely about capital accumulation; however, with the possibility of living 30 years or more in retirement, the emphasis is now on [managing your income during retirement]. If your only income source is a 401(k) plan, your income will be taxed as ordinary income. With diversified income sources that include a Roth IRA for tax free income, or a non-qualified investment portfolio for long term capital gains, you can minimize your taxes in retirement which will help make your income last longer.
Pension plans impact the performance of a company in both direct and indirect ways. Directly, pensions have an influence on a business’s financial statements, including the balance sheet. Companies are often responsible for partially funding pensions by contributing cash.
Pension plans impact the performance of a company in both direct and indirect ways. Directly, pensions have an influence on a business’s financial statements, including the balance sheet. Companies are often responsible for partially funding pensions by contributing cash.
I have attached the valuable links:
Which Type of Retirement Plan is Right for You? | The Motley Fool
How Do Pension Plans Impact the Performance of a Company? (azcentral.com)
The Ten Key Components of a Retirement Plan | Ruedi Wealth Management
Evaluating the Financial Performance of Pension Funds (worldbank.org)
Can pension plans help the economy? | BenefitsPRO
How the stock market impacts on your pension | PensionBee
The video about the five components of pension expense
The 5 Components of Pension Expense (for a defined-benefit plan) – Bing video
Steps for the discounted cash flows: 4 Method on Discounted Cash flows (DCF) Formula Techniques (ibusinessmotivation.com)
Discounted Cash flow Techniques: Discounted Cash Flow (DCF) Techniques: Meaning and Types (yourarticlelibrary.com)
RUBRIC
Excellent Quality
95-100%
Introduction 45-41 points
The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.
Literature Support
91-84 points
The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.
Methodology
58-53 points
Content is well-organized with headings for each slide and bulleted lists to group related material as needed. Use of font, color, graphics, effects, etc. to enhance readability and presentation content is excellent. Length requirements of 10 slides/pages or less is met.
Average Score
50-85%
40-38 points
More depth/detail for the background and significance is needed, or the research detail is not clear. No search history information is provided.
83-76 points
Review of relevant theoretical literature is evident, but there is little integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are included. Summary of information presented is included. Conclusion may not contain a biblical integration.
52-49 points
Content is somewhat organized, but no structure is apparent. The use of font, color, graphics, effects, etc. is occasionally detracting to the presentation content. Length requirements may not be met.
Poor Quality
0-45%
37-1 points
The background and/or significance are missing. No search history information is provided.
75-1 points
Review of relevant theoretical literature is evident, but there is no integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are not included in the summary of information presented. Conclusion does not contain a biblical integration.
48-1 points
There is no clear or logical organizational structure. No logical sequence is apparent. The use of font, color, graphics, effects etc. is often detracting to the presentation content. Length requirements may not be met
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