unit_3_project
pdf
keyboard_arrow_up
School
Michigan State University *
*We aren’t endorsed by this school
Course
105
Subject
Industrial Engineering
Date
Feb 20, 2024
Type
Pages
7
Uploaded by PrivateExploration20614
Unit 3 Project Disclaimer: The project is designed as a chance for you to display your understanding of the material covered in unit 3. Each project should be unique to the student. While it is acceptable to ask questions of your peers, tutors, and instructors, it is not acceptable to submit identical work. Project Overview:
Through this project you will get a sense for how your personal finances will be affected by your goal job and will plan your budget with an auto loan, a home loan, and other expenses. Please organize your work in a written document (word, google docs, etc.). Screen shots or Desmos links may be pasted into your document to support your work. Task 1: Purchase a Car 1.
Use an online shopping service to find a vehicle you want to purchase. Be realistic in terms of the type of vehicle you expect to be able to purchase and afford in 5-10 years. Include a screenshot of the vehicle that shows the price in your project document. a.
I would like to purchase a Porsche Cayenne. I found it on here
. b.
The screenshot of the vehicle is here: 2.
Pick an APR rate from the table below based on the type of vehicle you chose and an approximate credit score. You do not need to look up or use your actual credit score. State the rate you chose, with reference to the type of vehicle and credit score. a.
Based on my credit score and the fact that I am purchasing a used car, the APR is 3.71%
3.
Decide an amount you can pay as a down payment (based on either your current finances or your projected 5-10 year finances). Calculate your monthly payments using the following loan lengths (include screenshots or links to your desmos work): a. 48 months b. 60 months c. 72 months To calculate the monthly payments for the car loan with a $10,000 down payment, $63,205 car price, and a 3.71% APR, we can use the formula for calculating the monthly payment for a fixed-
rate loan: Monthly Payment = [P * r * (1 + r)^n] / [(1 + r)^n - 1] Principal amount (P) = $63,205 - $10,000 = $53,205 Monthly interest rate (r) = 3.71% / 12 = 0.0030925 For 48 months: Total number of payments (n) = 48 Monthly Payment = $1,196.58 For 60 months: Total number of payments (n) = 60 Monthly Payment = $933.51 For 72 months: Total number of payments (n) = 72 Monthly Payment = $769.77 4.
Calculate the total cost of buying the car for all scenarios (include screenshots or links to your desmos work): a.
All answers to questions 3 and 4 are on this link. a. 48 months b. 60 months c. 72 months To calculate the total cost of buying the car for 48 months, 60 months, and 72 months, we need to add up the total amount paid over the loan period, including the down payment. For 48 months: Total Cost ≈ $57,395.84 + $10,000 ≈ $67,395.84
For 60 months: Total Cost ≈ $56,010.60 + $10,000 ≈ $66,010.60
For 72 months: Total Cost ≈ $55,425.84 + $10,000 ≈ $65,425.84
5.
Compare the total costs and monthly payments from the 3 loan lengths. Explain which option you would choose. (Use this choice for your budget in Task 4.) a.
I will pay my car over 72 months since it is the cheapest option. 6.
Assume you get a lump sum of money (inheritance, lottery winnings, or something) and you can pay off your loan 10 months early. Using the rule of 78, with the loan length you selected in part 5 above, calculate the amount you would save by paying the loan early and
the early payoff amount (include screenshots or links to your desmos work). Total Interest = $65,425.84 - $53,205 = $12,220.84 Monthly Interest ≈ $12,220.84 / 72 = $169.74
Interest Earned Up to 62nd Month (10 months early) = Monthly Interest * 62 = $169.74 * 62 = $10,522.88 Thus, I save $10,522.88 in interest. 7.
Describe the pros and cons of paying off the vehicle early. Explain why you would or would not pay it off early. a.
Pros are saving on interest and having ownership of the car. The con is that the car is a depreciating asset and thus there is little benefit to paying off something that will lose value to begin with. Further, paying it off early comes with the opportunity cost of investing that money elsewhere into something profitable (say a stock or starting a business). Task 2: Purchase a House 1.
Using Zillow or some other online realtor site and find a house you want to purchase. Be realistic in terms of the type of home you expect to be able to purchase and afford in 5-
10 years. If you already own a house, search for either a similar property or somewhere you would like to move to. Include a screenshot of the house that shows the price in your project document. a.
I want to buy this house which costs $445,000. b.
2.
Find a mortgage rate using an online search and include a screen shot of the terms for the loan you chose. (Terms: length most likely (in years) and interest rate.) Do NOT
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help
enter any personal information into a mortgage site. Tip: Check the website of your bank or of a local bank or credit union or search for current average mortgage rates. a.
The current mortgage rate in Michigan is 7.29% APR. b.
3.
Calculate the monthly payments (include screenshots or links to your desmos work) for the loan you chose using each of the following assumptions: a.
20% down payment b. 10% down payment c. 0% down payment Monthly Payment = [P * r * (1 + r)^n] / [(1 + r)^n - 1] For 20% down: Monthly Payment = [$356,000 * 0.06075 * (1 + 0.06075)^n] / [(1 + 0.06075)^n - 1] = $2,274.41 For 10% down: Monthly Payment = [$400,500 * 0.06075 * (1 + 0.06075)^360] / [(1 + 0.06075)^360 - 1] = $2,162.11 For 0% down: Monthly Payment = [$445,000 * 0.06075 * (1 + 0.06075)^360] / [(1 + 0.06075)^360 - 1] = $2,051.02 4.
Calculate the total cost of your house for all 3 assumptions (include screenshots or links to your desmos work). a. 20% down payment b. 10% down payment c. 0% down payment The total costs are: a.
20% down: 2274.41 * 30 *12 = $818787.6 b.
10% down: 2162.11 * 30 * 12 = $778359.6 c.
0% down: 2051.02 * 30 * 12 = $738,367.2 5.
Compare the pros and cons of the different down payments amount. Include the monthly payments and total cost in your discussion. Explain which down payment option you would choose. (Use this choice for your budget in Task 4.)
a.
The pros of a larger down payment is that the value of the total cost goes down. I will however, use 0% down since I would like to have liquid cash for other investments and entrepreneurship. Task 3: Income Taxes 1.
Choose the job you will pursue upon graduation. Describe the job you selected. 2.
Use the internet to find the median annual entry level income of your selected job. Include a screenshot. This is your gross annual salary. •
I want to become a software engineer. The average salary is $101,414. •
•
Optional: If you are married, estimate the annual gross income of your spouse. Add your estimated income to that of your spouse. Use this total as your gross annual salary. 3.
Assume you will have to pay taxes on your income. Decide if you want to file single, married filing jointly, married filing separately, or head of household and calculate the federal taxes you will owe on your gross income. The standard deduction for 2022 is $12,950 for single or $25,900 for married, $19,400 for head of household. Determine your taxable income by subtracting the deduction your chose. Record this value as your adjusted gross income (AGI). •
As a single person, my AGI is now $88464. 4.
Using your AGI calculate the federal taxes you will pay. Tax brackets shown on next page. •
Show your work, including the amount owed for each bracket and the total amount of federal tax owed. i.
=(10275 * 0.10) + (41175 * 0.12) + (36414 * 0.22) = $14,051.58
•
Optional: If you have eligible children under age 17, deduct the child tax credit of $2000 per child from the amount of federal tax owed. 5.
Assuming that you will be living in Michigan, calculate the following state taxes you will also pay. Include a screenshot or link to your desmos work. •
Michigan’s State Income tax (4.25% of AGI); i.
88464 * 0.0425 = $3579.72 •
Social Security tax (6.2% of gross annual salary under $117,000); and i.
=101414*0.062 = $6287.67 •
Medicare tax (1.45% of gross annual salary). i.
=101414*0.0145 = $1470.50 •
Optional: If you live in the city of Jackson, calculate your City Income Tax (1% of gross annual salary). 6.
After all taxes are taken out of your gross annual salary, you are left with your net annual salary, the amount of money you have left after paying your taxes. Based on all the information above, calculate your net annual salary. Show your calculations. Disposable Income: 76,024.53 7.
If you are paid bi-weekly (every other week), how much money will you receive in each paycheck (after taxes)? In other words, what is your expected net bi-weekly salary for this job? [Note: This would mean a total of 26 paychecks per year (52 weeks / 2).] =$2924.02
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help
Task 4: Putting It All Together 1.
Calculate the amount of money you will earn in a month (net annual salary divided by 12 months), from Task 3. 2.
Subtract the following costs: a.
Monthly car payment, from Task 1. b.
Monthly house payment, from Task 2. c.
Average utility costs (including electric, gas, trash, etc.) of $410 per month. d.
Average food costs of $285.25 per month, per person. 3.
Consider, and subtract, any of the following additional costs that apply to you. a.
Average gasoline costs of $175 per month. b.
Average cost of insurance of $340 per month. c.
Average cell phone costs of $75 per month, per person. d.
Average cable costs of $87 per month. e.
Average entertainment costs of $297 per month. f.
Average gym membership costs of $50 per month. g.
Average cost of childcare of $905 (infant) or $741 per month (toddler), per child. h.
Average cost of latchkey afterschool childcare of $195 per month for the first child plus $151 per month for each additional child. i.
Average cost of pet supplies of $20 per month, per pet. j.
Other (please specify). Disposable income = 2924.02 –
769.77 –
2051.02 –
175 –
75 –
340 = -$486.77 4.
Essay - Describe your reaction to the results. Consider the following: Will you have money left over each month or will your budget be tight? Are you surprised? Is it what you expected to earn? Does the cost of your degree justify pursuing this job considering your potential income? What is the high-end income of this field and does that change any of your thoughts? a.
I am shocked that even with a $100,000 + salary, I would still be in debt should I want to have a luxury car and a large house. This means that I need to make more prudent financial choices early on in my career. This may mean moving to a state with no income tax, getting a second job, or forgoing the luxury car until I get promoted.