Please help arrive at the capital depletion model for a couple.
If a married couple is each 43.
Husband makes 75000
Wife makes 50000
Required Rate of REturn is 8%
Inflation rate is 3%
If they retire at 62 what is the total needed assuming 80% wage replacement ratio to age 96? My calculations are below. Are they correct?
PV - 100,000 (80% of 125,000)
i - 3
Find Lump sum that they need to have to get to age 96 (beg mode)
PMT - 175,350
N 34 (96-62)
How much do they need to save? Below is portfolio
STock Portfolio = 200,000
401K = 250,000 (adding 7,500 annually)
IRA = 28,000
PV = 478,000
i = 8
n = 19
FV of Lump 2,062,905
Difference is 1,328,043
What is additional that needs to be saved?
FV = 1,328,043
i.0067 (8% / 12)
Are these numbers correct?
What do we do to figure Social Security changing how much is needed to save....Head of House - 29,996; Spouse - 22,468, beginning at age 62, 65, 67?
At age 62 they will have reduced benefits of 75.8% of SS
At age 65 they will have 94.4%
At age 67 they will have 100%.
The solution provides a capital depletion model for retirement planning for a married couple.
Balance Sheet Analysis
Obtain the latest annual report and accounts of a company of your choice.* Consult the Balance Sheet and determine the company's net asset value.
· What is the composition of the assets, i.e. the relative size of fixed and current assets?
· What is the relative size of intangible fixed and tangible fixed assets?
· What proportion of current assets is accounted for by stocks and debtors?
· What is the company's policy towards asset revaluation?
· What is its depreciation policy?
Now consult the financial press to assess the market value of the equity. This is the current share price times the number of ordinary shares issued. (The notes to the accounts will indicate the number of shares issued.)
· What difference do you find between the net asset value and the market value?
· How can you explain this?
· What is the P:E ratio of your selected company?
· How does this compare with other companies in the same sector?
· How can you explain any differences?
· Do you think your selected company's shares are under- or over-valued?
You chosen company MUST have a full listing on the London Stock Exchange.
You MUST attach to your coursework a copy of the latest annual report and accounts of your chosen company. (This does not contribute towards the word count.)
Your coursework should be no less than 1500 words and no more than 2500.
Ratio analysis as well as company valuation methods are required, along with a critical appraisal of the techniques used.